Alphabet Q4 Earnings Preview: AI, Digital Ads, and Cloud Growth in Focus
Alphabet (GOOG) is scheduled to report its fourth-quarter financial results on Tuesday after the market close. The release marks the start of earnings season for major US tech giants.
AI Competition and Revenue Streams
Wall Street will closely monitor Alphabet's response to the challenge posed by DeepSeek's AI models. The Google parent is expected to provide updates on its AI investments and efforts to monetize them.
Similar to Alphabet, Meta (META) is also heavily investing in AI to enhance its advertising effectiveness and user engagement.
Advertising Revenue
Advertising revenue is projected to reach $71.7 billion, a notable increase from $65.5 billion in the same period last year. This metric is crucial for Alphabet, as digital advertising remains a significant revenue source.
Cloud Growth
Alphabet's cloud business, Google Cloud, is expected to generate $12.1 billion in revenue, compared to $9.1 billion last year. Cloud growth is essential for Alphabet to compete with rivals Amazon (AMZN) and Microsoft (MSFT).
Regulatory Risks
Alphabet remains under regulatory scrutiny. Late last year, the company appealed a ruling that found it abused its market power in the search industry. A potential breakup of the company has been suggested as a remedy. However, the market appears unfazed by these immediate concerns.
Financial Performance
Analysts estimate Alphabet's earnings per share (EPS) to be $2.13 and revenue to reach $96.6 billion for the quarter. This represents an increase from $1.64 EPS and $86.3 billion in revenue during the same period last year.
Investor Considerations
Alphabet shares have outperformed the broader market over the past year. Investors will be keen to assess the company's outlook for AI, digital advertising, cloud growth, regulatory risks, and the potential impact of Trump's policies on the tech industry.