Alphabet (GOOGL) Third Quarter 2022 Results: What to Expect

SGoogle and YouTube’s parent alphabet hares (GOOG, GOOGL) have fallen 31% year-to-date, underperforming the 23% drop in the S&P 500 index. 13% and 24% in the respective three-month and six-month period, while only slightly exceeding the losses of the technology-heavy Nasdaq Composite during this period.

The tech conglomerate is due to release third-quarter fiscal 2022 earring results after the closing bell on Tuesday. Amid various macro concerns such as rising inflation, the company has also suffered a downturn in digital advertising. This is likely to persist given the recent decline in Snap (SNAP), which recently reported results from a brutal third quarter that missed Street’s estimates. That said, execution hasn’t been a problem for Google.

Over the past two years, the company’s quarterly reports have exceeded revenue estimates eight times in a row, while missing earnings estimates just once during that period. For this quarter, however, the Street forecasts a 9% year-over-year decline in EPS, while revenue is expected to grow approximately 8.5% from the same quarter in 2021. Digital advertising, which includes YouTube Ads, Search Ads, and Network Ads remains the company’s primary driver of revenue and profitability. Google’s ad business grew 12% last quarter to $56.3 billion.

Whether the advertising segment can begin to recover on Tuesday remains to be seen. Assuming a prolonged downturn in trends in the digital advertising industry, investors will look to see if Google’s cloud business, which currently accounts for less than 10% of total revenue, can be a significant offsetting factor. That said, given the market’s flight to quality, investors looking for companies that exhibit strong qualities such as sustainable revenue and earnings growth, strong cash flow and strong balance sheets can still do well. here.

For the quarter that ended in September, Wall Street is looking for the Mountain View, Calif.-based tech giant to earn $1.26 per share on revenue of $70.68 billion. That compares to the year-ago quarter where earnings were $1.40 per share on revenue of $65.12 billion. For the full year, ending in December, earnings are expected to decline 9% year over year to $5.11 per share, while annual revenue of $287.96 billion would rise 11 .8% year over year.

Year-over-year projections for revenue and earnings are not as strong as investors have grown accustomed to in previous quarters. However, the downbeat numbers underscore how the company has had to deal with recessionary pressures to sustain growth in its three operating segments. While Google Services remains the company’s core business, accounting for around 90% of consolidated revenue in 2021, Google Cloud Platform and Google Workspace are starting to show strong acceleration.

The company’s cloud revenue grew nearly 50% year-over-year in 2021. While Amazon (AMZN) Web Services (30% market share) and Microsoft (MSFT) Azure ( 20% market share) are the two main cloud providers, Google Cloud is gaining ground with a 9% share. The slowdown in ad activity, meanwhile, is likely to persist judging by Snap’s results. It’s also possible that Alphabet weathered the storm and that Snap’s results are its own and not passed on to Google.

In the second quarter, YouTube advertising revenue increased 5% year over year to $7.34 billion, while Google advertising increased 11% to $56.28 billion. Second-quarter cloud revenue was also impressive, growing 36% to $6.27 billion. This led to a 13% increase in total second-quarter revenue to $69.68 billion. However, the Cloud segment recorded an operating loss of $858 million, which contributed to the Adjusted EPS loss of $1.27. Along with improving third-quarter ad revenue, the Cloud segment will be watched closely by investors on Tuesday for continued growth.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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