Alphabet (GOOGL, GOOG) is set to report third-quarter earnings results after market close on Tuesday, with Wall Street optimistic the technology giant saw a resurgence in its search business as travel activity ramped up.
Here are the main metrics expected in Alphabet's report, based on consensus data compiled by Bloomberg:
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Revenue, ex-TAC [minus traffic acquisition costs]: $52.32 billion vs. $38.01 billion Y/Y
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GAAP earnings per share: $23.50 vs. $16.40 Y/Y
Alphabet has so far been the best performer this year among the "FAANG" names (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) of Big Tech, with shares growing nearly 57% for the year-to-date through Monday's close. Unlike many other technology names, Alphabet has been viewed as a key beneficiary of the reopening trade, given it stands to gain from a pick-up in travel-related searches and advertising on Google Search.
"We think GOOGL continues to face a high bar of expectations this quarter, but we think risk/reward continues to tilt positive," wrote BMO Capital Markets analyst Doug Anmuth in a note. "To be sure, the entire online ad ecosystem faces increasingly difficult comps into 1H22 as e-commerce activity normalizes somewhat. Moreover, after such consistent outperformance from GOOGL over 18 months, we think investors are beginning to look for an incremental leg to the story."
"With that said, we think GOOGL should prove resilient owing to YouTube’s leadership in CTV [connected TV] and the continued emergence of Cloud," he added.
Search has remained by far the biggest contributor to Alphabet's overall top-line growth, with search growing 68% to bring in $35.85 billion in revenue in the second quarter, before traffic-acquisition costs.
Other parts of the business have also been growing even more quickly and have comprised areas of opportunity for Alphabet to continue building out. YouTube ad sales grew 84% to top $7 billion in revenue in the second quarter. Google Cloud, a competitor to incumbent leaders in the cloud computing space like Microsoft Azure and Amazon Web Services, grew sales 54% to $4.63 billion last quarter.
Last week, however, Alphabet's shares sold off, tracking a broad move lower in ad-driven technology companies' stocks after Snap (SNAP) reported current-quarter guidance that fell far short of consensus estimates.
In its release, Snap cited changes to Apple's iOS operating system, which allows users to adjust how apps track their data, as a major headwind to its advertiser base, since the changes impacted how advertisers can track the strength of their ad campaigns. Snap's executives also cited ongoing global supply-chain challenges as another factor impacting its results, which reduced "short-term appetite to generate additional customer demand through advertising" given already outsized demand.
While Alphabet's advertising business may also be subject to these issues related to supply challenges, it will likely not see as notable an impact from Apple's iOS privacy changes to its advertiser base, a number of analysts said.
"GOOGL has significant first party data across its various properties, including strong user intent in Search and to a lesser degree in YouTube," said JPMorgan analyst Doug Anmuth in a note. "Shortages, of course, could be a factor in 4Q given GOOGL's heavy e-commerce and overall retail exposure."
This post will be updated with Alphabet's third-quarter results after market close on Tuesday. Check back for updates.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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October 26, 2021 at 09:09PM
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Alphabet earnings preview: Google 'should prove resilient,' Search advertising still robust - Yahoo Finance
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