Alphabet (Google) Stock Investors Just Got More Bad News From a Federal Judge

In 2020, the Justice Department sued Google, a subsidiary of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), accusing the company of operating an illegal monopoly in online search. In 2023, the Justice Department filed another lawsuit, accusing the company of operating an illegal monopoly in adtech software.

Federal judges have since ruled against Alphabet in both antitrust cases. The judges will next identify and impose remedial measures to curb its monopoly power.

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Here's what investors should know.

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August 2024: A federal judge ruled that Google has an illegal monopoly in internet search

The Justice Department lawsuit filed in 2020 alleges Google has entered into "a series of exclusionary agreements that collectively lock up the primary avenues through which users access search engines, and thus the internet, by requiring that Google be set as the preset default search engine on billions of mobile devices and computers worldwide."

For instance, Google reportedly paid Apple $20 billion in 2022 to maintain its status as the default search engine in the Safari browser. Also, Google reportedly pays Samsung an undisclosed amount for the same privileges. Consequently, both consumer electronics companies could lose a substantial amount of revenue, depending on the resolution of the antitrust lawsuit.

U.S. District Judge Amit Mehta sided with the Justice Department in August 2024, ruling that Google had engaged in illegal practices to preserve its monopoly in the internet search market. Both parties have since proposed remedies. Possible fixes range from prohibiting or limiting Google's ability to pay for default search placement to forcing the company to sell its Chrome browser and Android operating system.

District Judge Mehta plans to rule on remedies in August 2025. But Google has already said it will appeal an unfavorable decision, which means the legal battle may drag on for years.

April 2025: A federal judge ruled that Google has an illegal monopoly in ad tech software

Google provides adtech software for advertisers and publishers. Its publisher products include Google Ad Manager, AdMob, and AdSense, which help brands sell ad inventory from websites and mobile apps. Its advertiser products include Google Ads and Google Marketing Platform, which help media buyers plan, measure, and optimize campaigns.

Additionally, Google provides the real-time bidding technology, called AdExchange, where sell-side tools and buy-side tools interface to facilitate ad inventory transactions. Importantly, Google also sells its own inventory from properties like Google Search and YouTube, meaning it competes directly with publishers that use its sell-side tools.

The Justice Department lawsuit alleges Google engaged in "anticompetitive and exclusionary conduct that consisted of neutralizing or eliminating ad tech competitors." U.S. District Judge Leonie Brinkema sided with the Justice Department in April 2025, ruling that Google had violated antitrust laws by "willfully acquiring and maintaining monopoly power."

The federal judge will next consider potential remedies at a future hearing. Fixes could range from behavioral changes to a forced breakup. To elaborate, the court could simply impose barriers that prevent Google from engaging in anticompetitive practices, or the court could order Google to sell some portion of its adtech ecosystem.

Alphabet is a somewhat risky investment, but the stock trades at an attractive price

The current situation is far from ideal for Alphabet shareholders, but historical precedent says a breakup is unlikely. Antitrust lawsuits have not led to a breakup in four decades, according to The Wall Street Journal. And the last time a judge attempted to break up a big tech company, Microsoft in 2001, a federal appeals court ultimately reversed the decision.

Importantly, while the pending lawsuits remain a major unknown, Wall Street estimates Alphabet's earnings will increase at 12% annually through 2026. That makes the current valuation of 19 times earnings look quite reasonable, especially when Alphabet beat the consensus earnings estimate by 8% in the last six quarters. Investors comfortable with the risk should consider buying a small position today.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.