Alphabet Earnings: What to Expect?

Alphabet (Google parent) will unveil Q3 results, ad revenue is a key metric

Alphabet is due to release Q3 results after the closing bell today. So, what should investors be expecting? A disappointing performance like that of Q1 which sent the share price tumbling? Or the knockout earnings performance of Q2 which lifted the stocks some 10%?

Forecasts:
* Revenue expectation: $40.3 billion
* EPS expectation: $12.28

Ad Revenue
As always investors should focus on revenue growth. Weaker than forecast revenue from slowing ads sales spooked investors in Q1 (17% growth). However, a better than forecast figure in Q2 (19% growth) helped the stock surge. The key growth drivers were the usual catalysts; mobile search, YouTube and Google cloud. 

It is more important than ever that Alphabet shows investors that its revenue generator remains intact, at a time when it is facing an intense antitrust probe. There are no signs that revenue growth is slowing. Analysts are expecting Q3 revenue of $40.3 billion, growth of 19% compared to same quarter a year earlier. Shares have been on the rise recently, possibly in anticipation of solid revenue figures. 

Q3 results come as Google faces antitrust probes by Congress, the Department of Justice and nearly all US states. The antitrust probes are focused on Googles advertising business, its primary source of revenue.

Furthermore, there is the growing competitive threat from the likes of Snap and Amazon. Particularly the latter, whose increasing market share which is threatening Alphabet’s stronghold in the digital advertising market.

Given the high level of scrutiny, a slight miss in revenue could unnerve investors and send the stock sharply lower.

Other points worth watching:
• Paid clicks to see whether traffic volumes are increasing – a larger audience can offset and ad price drop.
• Regulatory barriers in Waymo ride hailing service
• Strong dollar headwinds negatively impacting both revenue and operating income
• How much is being spent on clod service to compete with Microsoft & Amazon cloud services?

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.