Alphabet (GOOG, GOOGL) is about to drop its Q2 2023 earnings on us, and the market is all ears. The big players are watching Google’s parent company like hawks, their eyes trained on cloud growth, ad revenues, and the ever-controversial AI efforts.
Key Metrics
Bloomberg has done its homework and here’s what the Wall Street analysts are expecting from Alphabet’s key metrics:
- Revenue: $72.75 billion
- EPS: $1.32
- Google Ad Revenue: $57.45 billion
- YouTube Ad Revenue: $7.41 billion
- Google Cloud Revenue: $7.83 billion
- Operating Income: $19.94 billion
Market Sentiment
JPMorgan analyst Doug Anmuth, in a note to investors, suggests that expectations for Alphabet are fairly muted this cycle. The sentiment is somewhat subdued, and AI remains a hot topic for investors. The question on everyone’s mind is whether GOOGL can drive incremental monetization through generative AI search. Anmuth thinks yes, but the jury is still out.
Revenue Acceleration
The revenue acceleration is most likely to appear in the company’s ad revenue, which is expected to be on a mild upswing as the digital advertising slowdown of the last year starts to stabilize. Last quarter, Big Tech rival Meta (META) made the case that the digital ad slowdown was ending all together.
Cloud Revenue
Cloud revenue will also be key – in Q1 2023, Google Cloud turned profitable for the first time, with the division growing by 28%.
AI and Alphabet
AI has been an overall tailwind in tech, and one that’s especially and inextricably linked to Alphabet. Since 2022, Alphabet has been entrenched in an AI standoff with Microsoft (MSFT), which re-launched its Bing search engine after doubling down on its investment in ChatGPT-maker OpenAI. Though Google still has far and away more users than Bing, Microsoft has managed to get back in the game, facilitating questions from some analysts about Google’s ability to innovate.
Regulatory Challenges
Google co-founder Sergey Brin has become increasingly involved as Alphabet has looked to step up its AI game. Notably, Alphabet – and Big Tech at-large – has also been in the crosshairs with regulators of late. For example, the leading European Union regulator, the European Commission, is in breaking up Alphabet’s ad tech business. Alphabet is about setting up guardrails on AI. Additionally, in January, the U.S. Department of Justice, alleging the company has a monopoly on online advertising.
