摩根士丹利-ChatGPT的智能体战略转型对生态系统意味着什么？-What Does ChatGPT's Agentic Pivot Mean for the Ecosystem-20250312

MorganstanleyRESEARCH

March12,202609:59PMGMT

InternetandRetail|NorthAmerica

WhatDoesChatGPT'sAgenticPivotMeanfortheEcosystem?

1)Itaddressesneedforbetterselectionandconsumer-preferredlink-outtodriveadoption2)MonitoringadoptionandAMZN'srolekeyfromhere3)SpeakstoGOOGL'smoats/edgetodriveagenticchange4)Underscoresvertical-specificagentic

opportunity5)Couldbeatailwindtoretailer/OTAprofit.

alphawise

5ImplicationsofChatGPT'sAgenticStrategicPivot:ChatGPT'srecentpivotinitsearlyagenticshoppingeffortsawayfromdirectcheck-outtowardslink-outand

directingtraffictowardretailer/supplierapps(Walmart,Target,B,

Instacart,etc.)isnotableaswecontinuetoanalyzeearlycommercialagentic

adoptionacrosstheLLM-basedtools.Wedetail5bigpictureread-throughsandourlatestAlphawiseagenticadoptiondata...whichinmanywaysreinforcetheneedforthischange.

1)WhytheChange?CommercialAgenticAdoptionDoesn'tAppeartoBe

Growing,andtheChatGPTShoppingExperienceNeededtoImprove:Ourlatestrecurringsurveyworkshowsthat~55%ofChatGPTusersareengaginginprice

comparison/productresearchand40%arepurchasingproducts...butneitherof

thosestatshavegrownmeaningfullyinthepast5months.Changingmillionsof

consumers'behaviorischallengingandrequiresdifferentiatedofferingswith

incrementalutility.Intheworldofonlineshopping,thatmeansscaledandcuratedinventory,amplediversereviews,shippingandpricingoptions,etc.Inourview,

ChatGPT'searlyagenticshoppingefforts(sofar)arebehindGOOGLandpaidsearch(andits50bnSKUreal-timeshoppinggraph,improvingalgorithmsleveragingmoredata,etc)inmultipleofthesekeyareas.

Exhibit1:Earlyagenticcommercialbehaviorsarelargelystableandnotgrowing(~40-55%ofusersareresearchingproductsand/orpricecomparing)...

PM(AmongAIPlatformUsers)

Oct-25Nov-25uJan-26uFeb-26

53%53%55%54%

60%

50%

40%

30%

20%

10%

0%

50%53%51%48%52%49%

50%

54%

47%

49%49%

36%

33%

NA

42%42%39%39%40%38%

43%44%

46%47%

41%

38%

34%

38%

ChatGPTGeminiPerplexityAIMetaAICopilotTargetShoppingWalmartSparkyAmazonRufus

Assistant

AIPlatforms

Retailer-SpecificAITools

Source:AlphaWise,MorganStanleyResearch

Idea

MorganStanley&Co.LLC

BrianNowak,CFA

EquityAnalyst

212761-3365

+1

Brian.Nowak@

SimeonGutman,CFA

EquityAnalyst

212761-3920

+1

Simeon.Gutman@

NathanFeather

EquityAnalyst

212761-9812

+1

Nathan.Feather@

PedroGil,CFA

EquityAnalyst

212761-2022

+1

Pedro.Gil@

JulianHerrera

ResearchAssociate

212761-1784

+1

Julian.Herrera@

KavyaANarayanan

ResearchAssociate

212761-4183

+1

Kavya.Narayanan@

NishantRChintala,CFA

ResearchAssociate

212761-0800

+1

Nishant.Chintala@

NikhilJaveri

ResearchAssociate

212761-3742

+1

Nikhil.Javeri1@

GregoryGao

ResearchAssociate

212296-3125

+1

Greg.Gao@

Internet

NorthAmerica

IndustryViewAttractive

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthis

report.

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RESEARCH

organstanley

Exhibit2:...with~20-40%ofMonthlyAIToolUsersReportMakingaPurchaseThroughThem...

PercentageofAIToolUsersthatMadePurchaseBasedonanAIRecommendation

50%

45%

40%

35%

30%

Oct-25Nov-25Jan-26Feb-26

43%

44%

40%

40%38%

41%

38%

38%

37%

38%

37%

36%

36%

37%

35%

32%

31%

32%

30%

30%

28%

27%

27%24%

24%

26%26%25%

23%

25%

20%

15%

10%

5%

0%

ChatGPTPerplexityAIGeminiMetaAICopilotWalmartSparkyTargetShoppingAmazonRufusAssistant

AIPlatformsRetailer-SpecificAITools

Source:AlphaWise,MorganStanleyResearch

Tous,

Exhibit3

isalsotellingas34%ofpeoplenotusingagenticshoppingsaytheyarenotdoingitbecausetheyprefertovisittheretailers'site(ineffectthepaid

searchmodel).Thiscouldwellbelinkedtothe"trustfactor"...with36%ofpeoplesayingtheydon’ttrusttheAIrecommendationsforshopping.Bottomline,we

believeachangeinstrategytoprovide/surfacemoreinventoryandretailer-specificinformationandinterfacewasneededtodrivecommercialadoption.

Exhibit3:~34%ofpeoplewhoarenotusingAItoolsforshoppingsaythey

prefertovisitretailers'sites/apps...and36%don’ttrusttheAIrecommendations.

Source:AlphaWise,MorganStanleyResearch

2)ExpectChatGPTShoppingtoImproveasMonitoringAdoptionRemains

Key...andWatchAmazon:Tobeclear,weexpectChatGPT'sshoppingexperiencetoimprovefromthispivot.Assuch,ourrecurringsurveyworkandindustry

conversationswillremainimportanttoassessingwhetherChatGPTisgaining

commercialtraction.Theopportunityremainslarge,withChatGPT,webelieve,stillcapturingsingledigitpercentagecommissionsone-commercetransactions.Drivingmoretransactionvolumeisalsocriticaltoscalingaperformance-basedadbusiness(asChatGPTisbuilding).

Wealsothinkthischangeinstrategy(andpivottobemoresearch-likewithlink-out)furtherincreasesthechancesthatAmazoncouldbecomea(muchneeded)

Idea

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organstanley

RESEARCH

Idea

partnerinChatGPT'sagenticoffering(see

here

forwhythismattersforAmazon).

3)ThisShowcasesTheMoatsAroundGoogleSearch,WithGoogleNow

ControllingThePaceofFullyAgenticE-commerceAdvances:Oursurveydatacontinuetoshowthatonlineshoppingbehavior(acrosse-commerce,travel,

financials,autos,etc)startsonGoogleandSearch.Thatbehaviorisn't

changing….andGOOGL'sproductsarealsoimproving(see

here)

.This,inourview,willmakethemmoredifficulttodisrupt.

Exhibit4:Withine-commerce,GOOGLretainsitsleadingspotatthetopandmiddleofthefunnel(stillnotablylargerthanAmazon).ChatGPT'sposition

remainsrelativelysmall.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FirstWebsite/AppYouGotoWhen...(AmongConsumersPerformingActivityOnline)

1%

4%

1%

4%

2%

4%

3%

2%

3%

2%

1%

1%

3%

2%

1%

5%

4%

4%

4%

4%5%4%

1%

9%

4%

8%

5%

20%

16%

13%

30%

41%

43%

56%

40%

23%

20%

13%6%

9%

6%

40%

41%

20%

29%

22%

57%

56%

40%

26%

16%

12%

12%

18%

09/2403/25

09/25

09/24

03/25

09/25

09/24

03/25

09/25

Researchingproducts

online

Comparingprices

Knowexact

productto

purchase

Etsy,RedditorOther

ChatGPT

TikTok

Target

eBay

Facebook,

InstagramorPinterest

Walmart

Amazon

Google(inc.YouTubeandGemini)

Source:AlphaWise,MorganStanleyResearch

AndwhileChatGPTispivotingitsagenticstrategytobemore"search-like"todriveadoption,GOOGLispressingonwithitson-platformagenticpaymenttoolsand

APIslikeAgenticPaymentsProtocol(see

here

forfullwrite-up).Overthelong-run,thesetoolscangiveGOOGLanadvantagewithinagenticcommerceifbehavior

movesinthatdirection.Butwiththelackofamaterialfullyagenticcompetitive

threat(aswepreviouslythoughtChatGPTwasgoingtopushthisyear)weexpectGOOGLtoroll-outandexpandtheseagentictoolsinatest/learnandcontrolledmanner...enablingthemtopreservetheirsearchpositionandleadingunit

economicswhilealsodrivinginnovationandbehaviorchange.

4)VerticalSpecificAgentsLikelytoShowcaseValueBeforeHorizontalAgents:Thesechangesreinforceourviewsthatvertical-specificagentsarelikelytosee

adoptionanddriveincrementalvolume/valueaheadofbroaderhorizontalagentsasdetailedin

Internet:10DebatestoShapetheSectorandKeyPicksin'26(12Jan

2026)

ConsiderthatincomingweeksweexpectWalmart’s‘Sparky’tobeembeddedwithinChatGPT,convertingtheinteractionintoanagent(OpenAI)-to-agent(Walmart)

transaction(aswrittenabout

here)

.Weexpectmoreofthesehorizontaltoverticalagentichandoffs...andbigpictureexpectverticalspecificagents(Walmart'sSparky,Amazon'sRufus,B'sPenny,Expedia'sRomie,Instacart'sagenticshopper,etc)andtheirabilitytoleveragevertical,domainandplatform-specificdatasetstodriveutilityandadoption.Amazon'sRufusisalreadydrivingalmost200bpofgrowthtoGMV(asoneexample)andweexpectmoreofthesedatapoints

ahead...withthemarketlikelyrewardingplatformsthatareseeingincrementalvolumefromGenAIasAIwinnersandbeneficiaries.

MorganStanleyResearch3

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5)AsRetailersandSuppliers(IncludingOTAs)CouldBeWinnersifChatGPT

ShoppingGainsTraction:Vertical-specificagentscoulddrivemorevalueandthechangesbyChatGPTreinforceourbullishviewsonBKNG(see

here)

,AMZN,DASH,WMT,andEBAYwhichhavemultiple'I'sinouragenticframeworkthatgivethemleverageoverhorizontalagents'abilitytocreatedifferentiated,scalableofferings.Thismayalsotemperbearfearsforcompanieswhereperceiveddisintermediationriskwashigher(suchasETSY),shiftingthefocusmoretoincrementaltraffic

generated.

ButthereisanevenmoresignificantbenefittosupplierstomonitorbecausewebelieveChatGPT'scurrentsingledigitpercentagecommissionratesare

substantiallylowerthanthe"effectivepaidsearchtakerates."WebelievetheOTAsarenotpayinganycommissionasnow.Whileweacknowledgetheratesmaychangeovertimeasthisstrategicchangeisrolledout,thecurrentstructuredoescreateanopportunityfordownstreampartners(retailers,OTAs,etc)torealizebenefitsoflowercustomeracquisitioncosttheextenttowhichChatGPT'snewcommerceofferinggainstractionattheexpenseofpaidsearch.

Exhibit5:Webelievecurrent"effectivesearchtakerates"are5-10xhigherthanearlyagenticcommissionofferingsfromChatGPT

80%

70%

Spendasa%ofGMV

60%

50%

40%

30%

20%

10%

0%

AssumeIndustryAverageof~33%

40%

9%

20%

3%

ChatGPTEst.

TransactionTake

Rate

GoogleSearchCostperClick

Source:CompanyData,MorganStanleyResearch

PleaseseethebodyofthisnoteforthefulldetailsfromourlatestAlphawiseagenticsurveydata

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RESEARCH

Idea

AlphaWiseAgenticSurveyUpdate

WenowturntoourlatestrecurringAlphaWisesurveytrackerofconsumerbehaviorandagenticcommerceadoption,withthreekeytakeawaysthatgenerallyhighlighttheneedforinnovationtodrivefurtheradoption:

1)ChatGPTandGeminiOverallAdoptionContinuestoInchToward50%of

Americans...46%/32%ofUSrespondentsreportedusingChatGPT/Geminiinthepast

month,onlyslightlyhigherthan45%/32%inOctober.Thisrelativelyslowincrementaladoptionoflatespeakstotheimportancefortheproductstoevolveandimproveandprovidenewsourcesofconsumerutility.Itisalsoareminderofthestrengthand

durabilityoftheexistingleadingconsumerplatformslikeGoogleSearch,FacebookandInstagram...whichareallseeingstrongengagementgrowthoffofmuchlargeruser/timespentbasesfromimprovedmachinelearningandtoolrollout...whichwillthereforemakethemhardertodisrupt.

Retailer-specificAIassistantadoption(WalmartSparky,AmazonRufus,andTarget

ShoppingAssistant)isalsorelativelystable.AMZNhassizedthecontributionfromRufus(adding140bpstoGMVgrowthin4Q)...andfurtheradoptionandinnovationonthese

toolsstillhasthepotentialtodrivehigherspend/attachfromtheir(likely)powerusers/earlyadopters.WethinkthiscouldbecomemorepronouncedincomingmonthsgiventherecentagenticchangesbyChatGPT(discussedinmoredetailbelow)

Exhibit6:ChatGPT/Geminicontinuetoleadinoveralladoptionwith46%/32%ofrespondentscitingusageinthepastmonth...upslightlyfrom45%/32%inOctober.

UsedAIPlatformPM(AmongTotal)

60%

50%

40%

30%

20%

10%

0%

Oct-25Nov-25Jan-26Feb-26

47%

45%

44%

46%

32%33%32%

28%

21%

20%

19%

22%

16%16%14%

14%

13%13%

10%

11%13%12%14%

8%9%8%8%

4%

4%4%4%

NA

ChatGPTGeminiMetaAICopilotPerplexityAIAmazonRufusWalmartSparkyTargetShoppingAssistant

Source:AlphaWise,MorganStanleyResearch

...WithChatGPTStillShowingStrongAdoptioninYoungerCohorts:InFebruary,~60-70%ofpeopleaged16-34usedChatGPT,somewhatofadowntickfromJanuaryto

monitor,thoughstillwellaheadofGeminiandothers.Geminiadoptionremainsinthe~35-45%rangeofpeopleaged16-44andisrelativelystable.ChatGPT'syoungercohortadoptionedgespeakstoitsmulti-year"agingup"opportunityandtheimportanceforGOOGLtocontinuetoshipproductstobridgethegapinyoungercohorts(wesee

YouTubeasapotentialdistributionadvantagehere).

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Idea

Exhibit7:ChatGPTisstillleadinginearlyadoptionacrosstheagegroups...withitsadvantageamongyoungercohortsnotable.ThisspeaksbothtoChatGPT'sopportunityandtheimportanceofGOOGLcontinuingtoshipnewproducts.

175%

150%

125%

100%

75%

50%

25%

0%

UsedAIPlatforminthePastMonthbyAge(AmongTotal)

Copilot

ChatGPT

PerplexityAI

MetaAI

Gemini

19%

13%

26%

33%

10%

23%

34%

19%

28%

40%

9%

28%

38%

14%

21%

27%

31%

13%

27%

18%9%

30%

36%

29%

41%

18%

21%

27%

38%

3%

25%27%

17%

33%

45%

40%

18%21%20%

32%

44%44%

14%

12%

9%

17%

21%

2%

13%

20%

25%

34%29%35%

9%

13%

74%

68%

20%

67%

65%

20%

22%

62%

69%

56%

61%

51%

49%

Oct-25

49%51%

42%44%42%

24%

Feb-26

Nov-25Jan-2625-34

Oct-25

Nov-25Jan-2616-24

Nov-25Jan-26Feb-2635-44

Feb-26

Oct-25

Feb-26

Oct-25Nov-25Jan-26Feb-26

55+

Oct-25Nov-25Jan-2645-54

Source:AlphaWise,MorganStanleyResearch

2)CommercialBehaviorSignalsAlsoLargelyStable,with~40-55%ofAIUsers

ResearchingProducts/PriceComparing...~54%/44%ofChatGPT/Geminiusersnow

reportresearchingproducts/comparingpricesforproductsoneachplatforminFebruary.Similarly,~50%ofWalmartSparkyandAmazonRufususersareengaginginproduct

research/comparingprices,whileTargetIsagenticcommercialbehaviordroppedoffwhichwewillmonitor.

Exhibit8:Earlycommercialtrendsarealsolargelystable(~40-55%ofusersareresearchingproductsand/orpricecomparing).

UsedAIPlatformPM(AmongTotal)

Oct-25Nov-25Jan-26Feb-26

60%

50%

40%

30%

20%

10%

0%

47%

45%

44%

46%

32%33%32%

28%

21%

20%

19%

22%

16%16%14%

14%

13%13%

10%

11%13%12%14%

8%9%8%8%

4%

4%4%4%

NA

ChatGPTGeminiMetaAICopilotPerplexityAIAmazonRufusWalmartSparkyTargetShoppingAssistant

Source:AlphaWise,MorganStanleyResearch

…And~20-40%ofAgenticUsersMakingPurchases...WhichSpeakstothe

OpportunityandNeedforImprovementstoDriveBroaderPurchaseBehavior.

ChatGPTandGeminicontinuetoseegoodearlysignalwith40%/31%ofusersmaking

purchasesontheplatformsinFebruary,bothupmodestlyfromFebruary.Butsteppingback,andadjustingforthe47%/33%broadertooladoption,thesedatastillimplyonly

~18%/10%ofAmericansmadeapurchasethrougheachplatforminFebruary.ThisinourviewspeakstotheneedforproductinnovationandchangesChatGPTismaking(detailedabove).

Notablyretailer-specificagenticpurchasebehaviorratesareatorabovethatofthebroaderplatforms...speakingtotheopportunityforSparky/Rufus/Targettodrive

potentialincrementalgrowth/sharegainsiftheycandriveagenticadoption.Formoreon

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MorganStanleyResearch7

organstanley

RESEARCH

Idea

ourviewonwhyretailer-specificagentsmaydriveupsidefasterthanbroader-based

platformagentspleasesee

Internet:10DebatestoShapetheSectorandKeyPicksin'26.

Exhibit9:~20-40%ofMonthlyAIToolUsersReportMakingaPurchaseThroughThem...

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

PercentageofAIToolUsersthatMadePurchaseBasedonanAIRecommendation

nOct-25Nov-25nJan-26Feb-26

41%

38%

37%

35%

32%

30%

26%26%25%

23%

27%24%

40%38%

43%

44%

40%

36%

37%

28%

27%

24%

31%

30%

38%

38%

37%

36%

32%

ChatGPTPerplexityAIGeminiMetaAICopilotWalmartSparkyTargetShoppingAmazonRufusAssistant

AIPlatformsRetailer-SpecificAITools

Source:AlphaWise,MorganStanleyResearch

Exhibit10:...whichimplies~18%ofAmericanshavemadeAIdrivenpurchasesonChatGPTand10%havepurchasedthroughGemini.Retailerspecificpenetrationisloweronlybecauseofsmalleruserbases.

20%

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

PercentageofSurveyRespondentsthatMadePurchaseBasedonanAIRecommendation

Oct-25Nov-25Jan-26Feb-26

16%

10%

5%

4%

3%2%

1%1%

5%5%5%

5%5%

10%9%

18%18%

1%1%

18%

4%

4%

4%

4%

4%

2%

6%

5%

5%

ChatGPTGeminiMetaAICopilotPerplexityAIWalmartSparkyAmazonRufusTargetShoppingAssistant

AIPlatformsRetailer-SpecificAITools

Source:AlphaWise,MorganStanleyResearch

3)AITrustQuestionMarksandPreferencetoLookDirectlyonRetailers'Websites

AmongTopReasonsPeopleareNotUsingAgenticShoppingTools:Oursurveydatafindthat,forconsumersnotusingAItoolstoshop,theyhave(1)apreferenceforin-store

exploration(2)alackoftrustinAIrecommendationsand(3)apreferencetoshoporlookforproductsdirectlyonretailerwebsites.Leavingthe"offlinepreference"aside(aswe

expecte-commercetocontinuetogrow),theothertwofactorsarenotableandfurther

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RESEARCH

Idea

reinforce1)whyChatGPTmayhavemadethechangetolink-outand2)GoogleSearchIsmoatsanddefensibility.

Exhibit11:~34%ofpeoplewhoarenotusingAItoolsforshoppingsaytheyprefertovisitretailers'sites/apps...and36%don’ttrusttheAIrecommendations.

Source:AlphaWise,MorganStanleyResearch

AlphaWiseSurveyMethodology:Onlinesurveyof~2,000consumersages16-75yearoldintheU.S.conductedJanuary22nd–26th,2026.TotalsampleisrepresentativeoftheU.S.generalpopulationintermsofage,genderandregion.Themarginoferroronthetotal

sampleis±1.8%at90%confidencelevel;higherforsubgroups.

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MorganStanleyResearch9

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RESEARCH

Idea

RiskReward–AlphabetInc.(GOOGL.O)

AlphabetInc.

PRICETARGET$330.00

Ourpricetargetisdeterminedusingadiscountedcashflow/discounttolong-termEBITDAmultiple.Itimpliesa~24X'27P/EMultiple.OurDCFusesa~8%WACCanda~3%terminalgrowthrate(inlinewithothergrowth-orientedinternetcompanies)

$359.84

ConsensusPriceTargetDistribution

Source:Refinitiv,MorganStanleyResearch

$185.00◆$420.00

MSPT

Mean◆MorganStanleyEstimates

RISKREWARDCHARTANDOPTIONSIMPLIEDPROBABILITIES(12M)

USD

600

$415.00(+34.43%)

Prob(>415.00)~14.7%

450

$330.00(+6.90%)

$308.70

Prob(>330.00)~38.3%

300

$200.00(-35.21%)

Prob(<200.00)~14.1%

150

0

MAR'25SEP'25MAR'26MAR'27

OVERWEIGHTTHESIS

.ContinuedAI-drivenplatform-level

innovationonSearch,YouTube,Cloud,andwithotherofferingsimproveconfidenceinthedurabilityoflongtermgrowth.

.Continuedexpensedisciplineleadsto

operatingleverageandupwardrevisionsonEPSandFCFestimates.

ConsensusRatingDistribution

88%Overweight12%Equal-weight0%Underweight

MSRating

Source:Refinitiv,MorganStanleyResearch

RiskRewardThemes

SecularGrowth:Positive

NewDataEra:Positive

ViewdescriptionsofRiskRewardsThemeshere

Key:HistoricalStockPerformanceCurrentStockPricePriceTarget

Source:Refinitiv,MorganStanleyResearch,MorganStanleyInstitutionalEquitiesDivision.TheprobabilitiesofourBull,Base,andBearcasescenariosplayingoutwereestimatedwithimpliedvolatilitydatafromtheoptionsmarketasof11Mar2026.Allfiguresareapproximaterisk-neutralprobabilitiesofthestockreachingbeyondthescenariopriceineitherthree-months’orone-years’time.ViewexplanationofOptionsProbabilitiesmethodologyhere

BULLCASE$415.00

Implied~16XI27bullcaseEBITDA.

FasterinnovationandSearch/GCP

accelerationleadtomultipleexpansionandhigherearningspower.Searchrevenue

acceleratesasAI-driveninnovationdeliversmeaningfulupsidetoengagement.NewAIofferingsproveincrementaltothetopandbottomlineanddon'tcannibalizecore

Search.YouTubeandCloudbecomeevenbiggercontributorstotop-linegrowth,andoperateatahighermarginthaninourbasecase.

BASECASE$330.00

Implied~14XI27basecaseEBITDA.

Assumespragmaticsearchrevenuegrowthin'26,continuedincrementalplatform

monetizationandGoogleCloudaccelerationin'26.AsGOOGLcontinuesplatform-levelinnovationonSearchandothercategories,weassumepragmaticrevenue/EBITDA

growth.GOOGLintroducesnewAIofferingswhichincreaseconfidenceinthedurabilityoflongtermgrowthandcalmfearsaroundcompetition.GoogleCloudaccelerates

drivenbynewpartnershipsandgrowingbacklog.

BEARCASE$200.00

Implied~8XI27bearcaseEBITDA.

Globaladgrowthslowsfurtherandmarginsfacepressure.Assumesslowersearch

advertisinggrowth,andthatadspendingslowsfurther.Expensedisciplinefailsto

materializeleadingtolowerthanexpectedmarginexpansionandadj.EBITDA.NewAIproductscreategreaterthanexpected

marginpressureduetolowermonetizationratesandincreasedcomputeintensity.

10

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RESEARCH

Idea

RiskReward–AlphabetInc.(GOOGL.O)

KEYEARNINGSINPUTS

Drivers

Totaloperatingincome(GAAP)($,mm)

2024

112,390

2025e

129,039

2026e

174,398

2027e

201,244

GAAPOperatingIncome(Loss)($,mm)

117,334

137,054

181,398

208,444

INVESTMENTDRIVERS

·Searchadvertisingspendcontinuestogainshareofglobaladvertisingbudgets.

·Mobilesearchadvertisingcontinuestotakeshareofonlinebudgets.

·Investmentsinvideodrivinglonger-termmonetizationatYouTube.

·Moderationofexpensegrowth.

GLOBALREVENUEEXPOSURE

●0-10%

●0-10%

●0-10%

●0-10%

●0-10%

●0-10%

APAC,exJapan,Mainland

ChinaandIndia

India

Japan

LatinAmericaMEA

UK

10-20%EuropeexUK

40-50%NorthAmerica

Source:MorganStanleyResearchEstimateViewexplanationofregionalhierarchieshere

MSALPHAMODELS

4/5

24Month

2/5

3Month

BEST

Horizon

MOST

Horizon

Source:Refinitiv,FactSet,MorganStanleyResearch;1isthehighestfavoredQuintileand5istheleastfavoredQuintile

RISKSTOPT/RATING

RISKSTOUPSIDE

·Newproductsgeneratehigherthanexpectedtoplinecontribution.

·Capitalreturnsthroughgreatersharebuybacks.

·Hiringand/orspendperheadcountislowerthanexpected.

RISKSTODOWNSIDE

,HighexposuretoSMBandtravelcouldpressureadrevenueinarecession

·ImproveddisclosurearoundtheGoogleand

OtherAlphabetsegmentsmaynotdecreasetheoverallinvestmentactivityofthebusiness.

OWNERSHIPPOSITIONING

Inst.Owners,%Active57.5%HFSectorLong/ShortRatio2.8x

HFSectorNetExposure13.9%

Refinitiv;MSPBContent.IncludescertainhedgefundexposuresheldwithMSPB.Informationmaybe

inconsistentwithormaynotreflectbroadermarkettrends.Long/ShortRatio=LongExposure/Short

exposure.Sector%ofTotalNetExposure=(Fora

particularsector:LongExposure-ShortExposure)/(Acrossallsectors:LongExposure–ShortExposure).

MSESTIMATESVS.CONSENSUS

FYDec2025e

Sales/

Revenue

($,mm)

395,621

402,836

405,169

400,283

EBITDA

($,mm)

173,506

175,128

180,233

176,518

Netincome

($,mm)

120,251

132,170

135,500

129,434

EPS

($)

10.06

10.81

11.04

10.61

Mean◆MorganStanleyEstimates

Source:Refinitiv,MorganStanleyResearch

MorganStanleyResearch11

organstanley

RESEARCH

Idea

RiskReward–AInc(AMZN.O)opPick

AMZNRiskReward

PRICETARGET$300.00

Our$300PTisbasedonapplyinga~29XP/Emultipletoour$10.4of'27EPSandimpliespaying~1.2XPEG,a~30%discounttoAMZN'speerm