Alphabet (GOOG, GOOGL) is set to release quarterly results after the bell on Tuesday, kicking off a big earnings week for US tech giants after a wobbly run on Wall Street.
The company is expected to offer updates on its efforts to turn massive AI investments into new revenue streams and its position in the massive digital ad market.
Here’s what Wall Street is expecting for some of Alphabet’s most significant metrics in the company’s fiscal third quarter, according to Bloomberg data:
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Revenue: $86.44 billion expected ($76.69 billion in Q3 2023)
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Adjusted earnings per share: $1.83 expected ($1.55 in Q3 2023)
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Cloud revenue: $10.79 billion expected ($8.41 billion in Q3 2023)
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Ad revenue: $65.5 billion expected ($59.65 billion in Q3 2023)
Last year, Google was widely seen as playing catch-up to Microsoft (MSFT), which was among the first in the tech world to reap the cultural excitement around consumer AI chatbots. But in the quarters since, Google has attempted to advance its own leadership position. Earlier this month, Alphabet CEO Sundar Pichai sent a note to employees outlining another internal reorganization, shifting personnel to prioritize AI development.
And last week, the Information reported that the company is developing AI-driven technology that takes over a web browser to complete tasks such as buying products or booking a flight. The report said that Google could preview the technology as early as December.
Analysts will be looking to probe the company’s progress on AI integration to get a better read on the costs of developing sophisticated AI technologies. Capital expenditures are expected to exceed $12 billion for the quarter.
Industry watchers also anticipate an expansion of Google’s cloud business, an increasingly important segment to investors because of its use in the development of artificial intelligence. Wall Street projects Google Cloud revenue to register nearly $11 billion, boasting a roughly 28% increase from the same period last year.
“We think GOOGL has the best cloud infrastructure for the AI era and, as a result, should allow it to better manage its cost profile compared to other cloud providers, while also benefiting from a host of new revenue opportunities,” said Angelo Zino, equity analyst at CFRA Research, in a note.
Alphabet’s report arrives during a turbulent moment for the company.
Earlier this month, the US Justice Department said in court filing that it may recommend a break-up of the company to boost competition in the search engine market. The DOJ is expected to provide a more detailed document by Nov. 20 outlining their proposed remedies.
Megacap earnings fall just a week before the tight contest between former President Donald Trump and Vice President Kamala Harris, adding another element of unpredictability.
Alphabet falls in the bottom half when it comes to “Magnificent Seven” stock performance, gaining 20% so far this year — well below Meta’s (META) and Nvidia’s (NVDA) spectacular climbs, but ahead of Tesla (TSLA) and Microsoft’s (MSFT) respective gains of 14% and 10%.
Some analysts who are bullish on the stock see its relative affordability as an attractive feature.
“While we don’t view the upcoming quarterly report as a likely catalyst for Alphabet, we do think shares are attractive at current levels with shares trading below the market multiple,” said Wedbush analysts in a preview note.
“We think there is a case for multiple expansion for Alphabet in the coming quarters and years as investors gain more comfort related to regulatory risk and the impact of generative AI on Google Search.”
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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