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Alphabet Earnings Preview

Google

Google’s parent company, Alphabet, will report the third-quarter earnings after the US markets close on 24 October, which will be the morning of 25 October in the Asia-Pacific time zone. Alphabet’s shares rose about 13% since the company reported second-quarter earnings that topped market expectations, making it the top performer among the US mega-cap tech companies in the last three months. Its Google Cloud, Google search, and YouTube ads revenue will be key elements of the upcoming earnings results that drive the near-term share prices.

Q2 earnings preview

Alphabet’s overall revenue rose 7% year on year in the second quarter, the fastest growth since the second quarter of 2022, but reported a single-digit growth for the fourth quarter in a row. And its earnings per share came to $1.44, up 19% from a year ago, returning to growth for the first time since the fourth quarter of 2021.

In the second quarter earnings reports, the highlight was on Google Cloud and YouTube ads, which were the two biggest contributors to the overall revenue growth, up 28% and 4.43%, respectively, from a year ago. The momentum in Google Cloud and Google Search is expected to continue in the third quarter.

CFO Ruth Porat assumed a new role as the chief investment officer of Alphabet and Google, responsible for Alphabet’s investment in its “Other Bets” segment and investments on 1 September.

Business’ key growing areas – AI integration, Google Cloud, YouTube ads

Since Microsoft launched ChatGPT in February, the Google search engine has faced a major threat. In response to ChatGPT, Alphabet introduced its chatbot tool, Bard, which was supported by generative AI, a Large Language Model (LLM). Despite the fast expansion of Microsoft ChatGPT, Bard tends to provide up-to-date information with more details. For example, it can make a travel or meal plan for you and can be considered a more tailored service than ChatGPT, which is more concentrated on generating writing content. Google announced that Bard has connected to Google apps, Gmail, YouTube, Drive, and Goold Flights, etc., which may help Alphabet to further grow its search ads revenue.

Google’s cloud business turned profitable in the March quarter for the first time in three years. The division generated $8 billion in revenue in the second quarter, up 8% sequentially. The momentum may continue in the third quarter, with its AI development.

Google’s YouTube ads revenue hit $7.7 billion in the second quarter, returning year on year-on-year growth of 4.4% after a two consecutive quarterly decline, thanks to its offering of short-form video, streaming service, and Primetime Channels.  CEO Sundar Pichai said that about 2 billion logged-in users every month watched YouTube Shorts, up from 1.5 billion a year ago in the second quarter.

Q3 Forecast by Bloomberg

Earnings per share: $1.44, + 36% year on year

Revenue: $75,483.61 billion, +9% year on year

Google Search & Other: $43,217 billion, +9% year on year

YouTube Ads revenue: $7,786 billion, +10% year on year

Google Cloud revenue: $8,608 billion, +25% year on year


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