Alphabet CEO Sundar Pichai gestures during a session at the World Economic Forum annual meeting in Davos.
Fabrice Coffrini | AFP | Getty Images
Google parent company Alphabet is set to report its third-quarter earnings after the bell Thursday.
Here’s what Wall Street expects:
- Earning per share: $11.29, according to Refinitiv estimates.
- Revenue: $42.90 billion, according to Refinitiv estimates.
- Google Cloud: $3.32 billion, according to StreetAccount.
- YouTube ads: $4.39 billion, according to StreetAccount.
- Traffic acquisition costs (TAC): $7.66B, according to StreetAccount.
Following the company’s first-ever revenue decline in Q2, Alphabet will show whether there’s been any rebound in its core advertising revenue, which was hit hard by customer spending pullbacks amid the Covid-19 pandemic.
In that quarter’s earnings call, Alphabet’s chief financial officer Ruth Porat said consumers and advertisers began increasing their search spending toward the end of the quarter but cautioned against forecasting any guaranteed stability. At the time, the company had already begun making cuts across hiring, investments and marketing budgets.
In addition to the pandemic, Alphabet faces increased pressure to keep its revenue steady amid regulatory scrutiny, which came to a head in the third quarter.
The biggest threat came last week, when the U.S. Justice Department filed its long-expected landmark antitrust lawsuit against Google, alleging the company has unlawfully maintained a monopoly in search by cutting off rivals from key distribution channels. Google execs urged employees to keep their heads down amid potential distraction from the case.
A couple of weeks prior, the House Judiciary subcommittee on antitrust released its own investigation findings of Big Tech, alleging Alphabet’s dominance and argued further scrutiny into its Fitbit acquisition proposal, which this week was postponed again until Feb. 2021. With both regulatory hammers, Google’s stock barely moved and, in fact, shares went up more than 2% on the DOJ case news.
Alphabet also faces pressure to produce revenue-generating e-commerce efforts as tech companies like Facebook and Amazon continue cashing in on the home shopping boom amid the pandemic. Executives faced numerous questions inquiring about Google’s e-commerce plans during last quarter’s earnings call.
Since then, the company has begun testing shopping integration with YouTube videos and revamping some of its shopping features within Search And Google Shopping in anticipation of the holiday season. The company, during the third quarter, also announced it would expand its free merchant listings to the Google Shopping tab in countries across Europe, Asia, and Latin America.
Wall Street will also be paying attention to Google’s Cloud business, whose market share still lags far behind rivals Amazon and Microsoft. The company struck some multi-year cloud deals but nothing significant during the quarter — at least nothing revealed publicly. In August, Google’s Cloud unit struck a government contract with the U.S. Customs and Border Protection to facilitate the use of artificial intelligence for a virtual wall along the southern border but, so far, the contract value hasn’t been disclosed.
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