Alphabet (GOOG, GOOGL) will release its second quarter 2023 results on Tuesday after the market closes.
Investors will be watching parent Google’s cloud growth, ad revenue and, of course, AI efforts.
Here’s what Wall Street analysts expect from Alphabet’s key metrics, compiled by Bloomberg:
Income: $72.75 billion expected
EPS: $1.32 expected
Google advertising revenue: $57.45 billion expected
YouTube ad revenue: $7.41 billion expected
Google Cloud revenue: $7.83 billion expected
Operating result: $19.94 billion expected
Overall, expectations for Alphabet will be quite subdued in this cycle, JPMorgan analyst Doug Anmuth wrote July 20 in a note to investors.
[Read more: Big Tech earnings: Everything you need to watch for]
“Sentiment is still somewhat mixed, and AI will remain a controversial topic for investors, particularly whether GOOGL can drive incremental monetization through generative AI research (we believe so),” he wrote. “As a result, we believe the bar for GOOGL is lower than for other mega-cap technologies. However, beyond revenue acceleration, the 2H catalysts for GOOGL are less clear, and progress in AI and cost improvement stories could take several quarters to materialize.”
This revenue acceleration is most likely to show in the company’s advertising revenue, which is expected to see a slight increase as last year’s digital advertising downturn begins to level off. Last quarter, Big Tech rival Meta (META) argued that the digital advertising downturn was coming to a complete end.
Cloud revenue will also be key – in Q1 2023, Google Cloud became profitable for the first time, with the division growing 28%.
AI and regulators weigh on Alphabet’s long-term plans
AI has been a tailwind in technology and is uniquely and inextricably linked to Alphabet.
Since 2022, Alphabet has been locked in an AI standoff with Microsoft (MSFT), which relaunched its Bing search engine after doubling down on its investment in ChatGPT maker OpenAI. Although Google still has far more users than Bing, Microsoft has managed to get back into the game, easing some analysts’ questions about Google’s ability to innovate.
Google co-founder Sergey Brin has reportedly become increasingly involved as Alphabet seeks to step up its AI game.
Notably, Alphabet — and Big Tech as a whole — has also been in the crosshairs of regulators lately. For example, the European Union’s main regulator, the European Commission, wants to break up Alphabet’s ad tech business. Alphabet is also in talks with EU regulators about putting in place AI safeguards. Additionally, in January, the US Department of Justice sued Google, alleging the company had a monopoly on online advertising.
Alphabet shares are up about 36% year-to-date.
Allie Garfinkel is a senior technical reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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