Alphabet (GOOG, GOOGL) is scheduled to report quarterly results after the bell on Tuesday, marking a big week for the US tech giant with updates on the race for AI supremacy, the state of the advertising market and escalating regulatory crackdowns. It will be the beginning of the. It coincides with the presidential election.
Investors will be looking for insight into Google’s recent layoffs and artificial intelligence efforts, as well as details from the earnings call about the company’s cloud business.
Here’s what Wall Street is expecting from some of the most important metrics for Alphabet’s fourth-quarter fiscal year.
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Revenue excluding traffic acquisition costs: Forecasted $70.97 billion ($63.12 billion in Q4 2022)
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Adjusted earnings per share: $1.59 expected ($1.05 in Q4 2022)
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Cloud revenue: $8.95 billion expected ($7.32 billion in Q4 2022)
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Advertising revenue: $65.8 billion expected ($59.04 billion in Q4 2022)
The report comes just weeks after Google laid off hundreds of employees across multiple departments in an effort to cut costs and focus on growth areas including AI. The tech giant will join its U.S. peers and others that have relied on layoffs to improve efficiency as they expand significantly during the coronavirus era.
Alphabet CEO Sundar Pichai said in a widely publicized internal memo earlier this month that the company will likely need to make further job cuts in 2024.
The biggest concern analysts raised was Google’s advertising growth rate compared to its main rival META, according to Thursday’s report. Ad revenue has been optimistic from recent quarters, with double-digit growth expected as the company integrates new AI tools into its traditional search infrastructure.
Alphabet describes the transition to AI as a momentous shift in society. However, as generative AI chatbots change the way people interact with the web, replacing boilerplate search engines with a more natural conversational style for users to access information, the technology could become a big part of Google’s flagship search product. It’s also a broader threat. The disruption brought about by the use of AI, especially for Google, is a major concern for some analysts.
Google has embarked on a number of initiatives both to power its search tools with AI (Bard and Search Generative Experience) and to deliver new advanced large-scale language models like Gemini. Analysts will be looking at the company’s AI integration progress to better understand the cost of developing advanced AI technology.
Last year, Google was widely seen as trying to catch up with Microsoft (MSFT), which was early to enjoy the cultural excitement around consumer AI chatbots in the tech industry. Microsoft has invested in OpenAI, the company behind the popular chatbot ChatGPT.
Google’s cloud business is expected to recover after falling short of expectations last quarter. The company is aiming to gain more market share in the cloud computing market, currently in third place behind West Coast competitors Amazon (AMZN) and Microsoft.
Alphabet’s results come at a moment when the status of Big Tech’s financial performance is clearer than ever on Wall Street. Strong profit growth from big tech companies is expected to continue to drive market gains, as California and Washington state giants lift the S&P 500 index. Alphabet is among an elite few tech companies whose profits are expected to nearly double. That will rise to 80% in the first quarter of 2024, according to FactSet data. The remaining 496 companies are expected to see a combined profit increase of 0.3%.
But the incredible advances in technology have also brought increased scrutiny from regulatory watchdogs. Closing arguments and judgment in the Justice Department’s antitrust case against Google are scheduled for later this year. And last week, the Federal Trade Commission ordered five tech and AI companies, including Alphabet, to provide information about their recent investments and partnerships related to generative AI.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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