Alphabet CEO Sundar Pichai walks to lunch at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 12, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet is scheduled to report fourth-quarter earnings Tuesday after the market closes.
Here’s what analysts are expecting:
- Earnings: $1.59 per share, adjusted, according to LSEG, formerly known as Refinitiv.
- Revenue: $85.33 billion, according to LSEG.
- Google Cloud: $8.94 billion, according to StreetAccount.
- YouTube ads: $9.21 billion, according to Street Account.
- Traffic acquisition costs: $14.1 billion, according to StreetAccount.
Alphabet shares climbed to a record last week, joining Microsoft and Meta in rallying to fresh highs in January. Those climbs follow dramatic cost-cutting efforts that executives put in place in 2023.
Growth is accelerating, sparked by a rebound in the digital ad market and Google’s continuing dominance in mobile ads. But expansion remains meek by the company’s historic standards.
Analysts expect to see revenue growth of just more than 12% for the period that ended Dec. 31, from $76.05 billion in the same quarter a year earlier. That would be slightly above the growth rate for the third quarter and represent the strongest year-over-year increase since the first quarter of 2022. Between 2015 and the end of 2021, revenue growth reached at least 15% in all but three quarters.
YouTube is helping lift overall results, with revenue in that unit expected to jump 16% from $7.96 billion a year earlier. Google Cloud, which competes with Amazon Web Services and Microsoft Azure, remains a growth engine, with expansion expected to reach 22% from $7.32 billion.
“Our sense is retail and travel benefited Search spend in 4Q, while YouTube benefited from a stronger brand market,” analysts at KeyBanc Capital Markets wrote in a report on Jan. 28. They have the equivalent of a buy rating on the stock and increased their target price to $165 from $153.
Across Alphabet, CEO Sundar Pichai continues to focus on investments in artificial intelligence and embedding new generative AI tools into more of Google’s key products. To get there, Pichai has said the company has to make cuts elsewhere, which means more layoffs on top of 12,000 cuts last year, equal to roughly 6% of its full-time workforce.
In a memo earlier this month, Pichai warned employees that additional downsizing is coming this year, telling them that investing in its top priorities means “we have to make tough choices.” The company cut several hundred jobs in mid-January, affecting employees in areas including hardware and central engineering.
Wall Street has shown its confidence in Alphabet’s cost-cutting strategy as well as its ability to maintain its dominant internet business, even as generative AI tools such as OpenAI’s ChatGPT present consumers with new ways to access information. The stock price dipped in late 2022 and early 2023, in part due to concern that Google users would migrate elsewhere, but shares are up more than 9% this year after rallying 58% for all of last year. They closed Monday at $153.51.
In December, Google launched the large language model called Gemini, which it considers its largest and most capable AI model to date. The company is planning to license Gemini to customers through Google Cloud for them to use in their own applications.
Tech investors will be focused on earnings this week from most of the top companies in the industry. Microsoft reports Tuesday, alongside Alphabet. Amazon, Apple and Meta are all scheduled to release quarterly results Thursday.
— CNBC’s Jennifer Elias contributed to this report.
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