Alphabet Q1 earnings are coming. Will the company surprise Wall Street? 📊

Alphabet (GOOGL.US) will report Q1 results today, after the close of the Wall Street session. The market expects modest revenue growth. In Q1, Alphabet made many decisions to reduce costs, amid market uncertainty. The market does not expect the report to be surprisingly successful. Investors expect the third decline in ad revenue since Google became a public company.

• Earnings per share (EPS): $1.09 per share, according to Bloomberg (nearly 10% decline y/y)
• Revenues: $68.99 billion, according to Bloomberg (1% y/y growth)
• YouTube revenue: $6.6 billion, according to StreetAccount.
• Google Cloud revenue: $7.49 billion, according to StreetAccount.
• Traffic acquisition costs (TAC): $11.78 billion, according to StreetAccount.

Revenue growth is expected to be modest mainly due to the fact that advertisers are spending less. The advertising sector accounts for more than 50% of Google's revenue, and may be the 'first' victim of a possible economic recession. The market estimates a decline in Google Ad revenue of up to 9% y/y. Similarly, it sees a deceleration in margin growth from the high-margin Google Cloud segment. A possible surprise in both of the above metrics could catalyze a positive reaction. Google Cloud still holds a small market share against AWS or Microsoft Azure.

Institutional investors

Raymond James: Analysts pointed to the company's successful cost-cutting, positive outlook and favorable and early positioning in the development of the AI industry. They maintained an 'Overweight' recommendation on Alphabet, saying the valuation remains attractive.

Bank of America: Cost-cutting may take longer but Q1 will already produce moderately positive results in terms of Google's market share. Only in Q2 will cost policy translate into higher margins. Possible constructive development of AI and search engine integration. They highlighted earnings stability, still healthy margins and a share buyback program.

Detailed results and market forecasts for Alphabet. Source: Bloomberg

Costs

• The company carried out its first major wave of layoffs since its 2004 IPO. In January, it announced it would cut 12,000 jobs (6% of its workforce). Google is also expected to incur an estimated $500 million in one-time costs related to reducing office space;
• The company has halted construction of a huge technology campus in California and has no plans to resume the project in the near future. This confirms that the company is beginning to weigh investments and only take actions that can be easily monetized.

AI

• Against the backdrop of the 'technology race' with Microsoft (MSFT.US) presenting results today, investors will be sensitive to inforamation about Bard AI and the Google browser itself;
• The two tools are competing with ChatGPT and Microsoft's Bing, respectively, with more analysts beginning to argue that the undivided dominance of Google's browser may be gradually waning;
• After the unsuccessful presentation of Bard AI in Paris, a wave of criticism and speculation about losing to Microsoft descended on the company. According to Google CEO Pichai, the LaMDA language model will be developed by the company 'very quickly.' The company will engage AI subsidiary DeepMind and create a separate Google Brain unit with it.

Alphabet stock (GOOGL.US) D1 interval. The main support zone may be determined by levels between $102 and $99, around the 23.6 and 38.2 Fibonacci elimination of the upward wave initiated in the fall of 2022. Between them, the SMA200 (red line) also runs at the level of $100. In case of increases, the first supply reactions can be expected around the previous local peaks, at $108 per share. Source: xStation5