Analysis of Potential Impacts of the UK CMA's Google Ad Tech Investigation

The UK Competition and Markets Authority (CMA) announced on December 16, 2025, that it would launch an anti-competitive investigation into Google’s ad tech business, focusing on Google’s abuse of market dominance in the digital advertising ecosystem. This is another major regulatory body’s review of Google’s ad tech following similar investigations in the European Union [1].

According to the latest financial data [0], Google’s parent company Alphabet currently has a market capitalization of $3.72 trillion and a stock price of $308.22. The company’s revenue structure shows:

• Google Search and Other Businesses
  : $198.08 billion, accounting for 56.6%
• YouTube Advertising
  : $36.15 billion, accounting for 10.3%
• Google Network
  : $30.36 billion, accounting for 8.7%
• Google Cloud Services
  : $43.23 billion, accounting for 12.4%

Ad-related businesses together account for approximately 75.6% of total revenue, highlighting the strategic importance of ad tech to Google [0].

Google has shown strong profitability:

• Net Profit Margin
  : 32.23%
• Operating Profit Margin
  : 32.19%
• ROE (Return on Equity)
  : 35.00%
• Free Cash Flow
  : $72.764 billion [0]

These indicators show that the ad business is Google’s main profit engine, providing financial support for the company’s innovative investments and shareholder returns.

• Fine Risk
  : The EU DMA (Digital Markets Act) stipulates that the maximum fine for violations can be 10% of global annual revenue, which could mean tens of billions of dollars in penalties for Google [1]
• Business Adjustment Costs
  : If it is necessary to change the ad tech architecture, there will be technical transformation costs and operational efficiency losses
• Revenue Diversion Risk
  : If forced to open the ad ecosystem, competitors may divert part of the ad revenue

The European Commission previously found that Google had abused its dominant position in the ad tech supply chain since 2014, especially by favoring its own ad exchange AdX through its dominant publisher ad server DFP, and favoring AdX through Google Ads and DV360 [1]. These behaviors were found to have intentionally given AdX a competitive advantage and may have excluded competing ad exchanges.

Google has significant advantages in the digital advertising market:

• Dominant position in the search advertising market
• Complete control of the programmatic ad tech stack
• Dominant market position of the publisher ad server (DFP)

• Short-term
  : During the investigation period, customers may adopt a wait-and-see attitude, affecting new customer acquisition
• Mid-term
  : If regulatory requirements open interfaces, competitors may gain market access opportunities
• Long-term
  : It may promote more diversification in the advertising market, but Google may still maintain an important position

Based on DCF analysis, Google’s valuation is under pressure [0]:

• Conservative Scenario
  : Fair Value $179.25 (-41.8%)
• Base Scenario
  : Fair Value $213.39 (-30.8%)
• Optimistic Scenario
  : Fair Value $302.76 (-1.8%)

The current stock price is $308.22, which has a premium of about 30% relative to the base valuation, and the market has partially incorporated regulatory risks [0].

• Revenue Growth Rate
  : Historical 5-year compound annual growth rate of 17.7%; the investigation may affect future growth expectations
• Profit Margin
  : The current 32% net profit margin may be under pressure due to increased compliance costs
• Cost of Capital
  : Regulatory uncertainty may increase risk premiums and cost of capital

1. Regulatory Penalty Risk
   : The UK CMA investigation may lead to significant penalties
2. Business Model Adjustment Risk
   : Need to redesign the ad tech architecture
3. Increased Competition Risk
   : Opening the market may lead to more competitors entering
4. Reputation Risk
   : Continuous regulatory investigations may affect brand image

• Strengthen cooperation with regulatory agencies and actively cooperate with the investigation
• Prepare compliance rectification plans and show a positive attitude
• Communicate with ad customers to stabilize business relationships

• Re-evaluate the ad tech business model to ensure compliance
• Diversify revenue sources to reduce dependence on a single business
• Invest in new technology fields such as AI to open up new growth engines

Investors need to re-evaluate Google’s valuation basis:

• Adjust growth expectations to reflect regulatory constraints
• Consider the impact of compliance costs on profit margins
• Recalculate the risk-adjusted cost of capital

• Investors with High Risk Tolerance
  : The current correction may provide an entry opportunity
• Conservative Investors
  : Wait for the regulatory results to be clear before making a decision
• Long-term Investors
  : Focus on Google’s layout in new fields such as AI; the long-term fundamentals are still solid

The UK CMA’s investigation into Google’s ad tech is another important signal of tightening regulatory environment, which will have a significant impact on Google’s ad business revenue, market share, and long-term valuation. Although it may cause stock price fluctuations and business uncertainty in the short term, in the long run, it will prompt Google to operate in a more transparent and fair competitive environment, which is conducive to the healthy development of the entire digital advertising ecosystem.

Based on the current analysis, the regulatory risks faced by Google have been partially digested by the market, but it is still necessary to pay attention to the progress of the investigation and the results of similar EU cases. Investors should remain cautiously optimistic, focusing on the company’s compliance rectification progress and the cultivation of new business growth points.

[0] Gilin API Data - Google’s financial data, valuation analysis, and market information
[1] Hausfeld LLP - “2025 Year in Review: Competition Disputes” - Detailed analysis of the EU’s antitrust investigation into Google’s ad tech
[2] Web Search Results - News reports and market analysis related to the UK CMA investigation