Alphabet stock pops 6% in premarket trading after Google avoids break-up in antitrust case

Alphabet shares rose 6% in premarket trading on Wednesday as investors viewed the result of Google's antitrust case as broadly favorable to the tech giant.

The U.S. Department of Justice (DOJ) had proposed a sort of break-up of Google, which included divesting its Chrome browser, in an antitrust case that began in September 2023.

While Google was last year found to hold an illegal monopoly in its core market of internet search, U.S. District Judge Amit Mehta ruled against the most severe consequences that were proposed by the DOJ.

Google will not have to divest Chrome. The company can also still make payments to companies to preload products, but it cannot have exclusive contracts that condition payments or licensing.

That means Google will still be able to pay Apple the billions of dollars it does to be the default search engine on iPhones.

Apple shares were also higher in premarket trade.

"This is a monster win for Cupertino and for Google its a home run ruling that removes a huge overhang on the stock," Daniel Ives, global head of technology research at Wedbush Securities, said in a note on Tuesday.

Google has been facing rising competition to its core search business from the likes of Perplexity and OpenAI. But the company has so far fended off challenges with its advertising business still growing.

Google has pinned its hopes of becoming a major artificial intelligence player on Gemini, its suite of AI models and the chatbot that goes by the same name.

"Following today's announcement, we are increasingly constructive in the longer-term durability of Google's Search business and are raising our estimates accordingly," Ives said, adding that he now has a new price target of $245 for Alphabet's stock.

The ruling also means Google will not have to divest the Android operating system that it develops.

Android is seen as a key tool for Google to increase the number of users for Gemini given that around 70% of smartphones globally run the operating system, giving the U.S. technology giant an existing base of users.

— CNBC's Jennifer Elias contributed to this report.