$Alphabet(GOOGL)$ will be reporting the fourth-quarter earnings on 04 Feb 2025 after the market close. GOOGL reported third-quarter earnings that beat on top and bottom lines with strong revenue growth from the company’s cloud unit.
For this earnings, LSEG is expected the earnings per share to came in at $2.12 versus $1.85, with revenue of $88.27 billion versus $86.30 billion.
Alphabet (GOOGL) Last Positive Earnings Calls Result in 20.38% Share Price Gains Since
We saw GOOGL share price have a 20.83% since its last positive earnings call on 29 Oct 2024, the sentiment is positive as the earnings call reflected strong revenue growth driven by advances in AI and cloud services, alongside significant achievements in YouTube and Waymo.
However, challenges were noted in network revenue declines, legal uncertainties, and increased capital expenditures.
Alphabet (GOOGL) Guidance On Strategic Focus And Financial Performance
During Alphabet's Q3 2024 earnings call, the executives provided extensive guidance on the company's strategic focus and financial performance. Sundar Pichai highlighted the company's strong momentum driven by innovation and AI investments, noting that Google Cloud revenue grew by 35% to $11.4 billion with a 17% operating margin.
The company also saw Google Services revenues increase by 13% to $76.5 billion, led by a 12% growth in search and other revenues. YouTube ads revenues also grew by 12%, contributing to the overall 15% increase in consolidated revenue.
The executives emphasized their commitment to enhancing AI capabilities, with Pichai mentioning that AI overviews are reaching over 1 billion users monthly, and Gemini models are now integrated into all major products. Alphabet reported an operating income increase of 34% to $28.5 billion, with an operating margin of 32%.
Free cash flow for the quarter was $17.6 billion, and the company returned $15.3 billion in share repurchases and $2.5 billion in dividend payments to shareholders. Looking forward, Alphabet plans to continue investing in AI and technical infrastructure while maintaining cost discipline to support growth opportunities.
What To Watch For Alphabet (GOOGL) Q4 Earnings
Here are some of the numbers that the market would be watching and we need to understand also what have helped GOOGL to obtain a positive third-quarter.
Record Revenue Growth - Google Cloud Another Largest Contributor
Consolidated revenue increased by 15% year-over-year, with Google Cloud revenue growing by 35%. Google Cloud revenue is expected to come in at $11.35 billion versus $10.88 billion.
But we need to also watch Network advertising revenue which decreased by 2% year-over-year in the third-quarter.
AI and Google Cloud Innovations
Gemini models have seen API calls grow nearly 14x in a 6-month period, and Google Cloud's operating income increased to $1.9 billion with a 17% operating margin.
YouTube Advertising Revenue To Increase
YouTube's combined ad and subscription revenue over the past four quarters surpassed $50 billion, with ad revenues growing 12% year-over-year.
According to StreetAccount, the YouTube advertising revenue is expected to come in at $8.92 billion versus $8.89 billion,
AI Offerings To Help Stronger Cloud Results
Investment in AI infrastructure, including data centers and custom GPUs, has significantly reduced machine cost per query by more than 90% in 18 months.
The company reported blowout cloud revenue at $11.35 billion, up nearly 35% from the $8.41 billion a year ago. The company attributed its strong cloud results to its artificial intelligence offerings, which include subscriptions for enterprise customers.
Waymo Expansion
Waymo is now the technical leader in the autonomous vehicle industry, with 1 million fully autonomous miles driven weekly and an expanded partnership with Uber. Traffic acquisition costs (TAC) is expected at $13.72 billion vs. $13.53 billion, according to StreetAccount
Expenses Increased Due to Legal and Capital Expenditures
Total operating expenses increased by 5% due to facilities-related charges and depreciation, despite a decline in charges for legal matters.
Ongoing legal scrutiny with potential impacts on search access points, especially regarding the Apple ISA contract. CapEx is expected to increase in 2025, as the company continues to invest heavily in AI and infrastructure.
Alphabet (GOOGL) Year-To-Date Returns
As I am holding GOOGL for the long term, I believe the A.I. offerings should continue to help GOOGL stay on top of the race of cloud providers.
This should continue to help them to differentiate especially with DeepSeek coming, customers would be looking at different solutions on how to reduce their cost, especially CAPEX in AI deployment.
With a 7.79% YTD gain, this seem to be on the low side, I am expecting it to be around 10% at least.
Technical Analysis - Exponential Moving Average (EMA)
We are seeing GOOGL maintaining the range highs all throughout the January volatility and maintaining a daily uptrend in the process.
If you watch the chart, GOOGL is going for the all-time high breakout and another very solid close above the $200 mark. This is the time we finally see that GOOGL can break out and go for it, but we need to understand that GOOGL is having their earnings tomorrow (04 Feb) so GOOGL does not move much before its earnings.
But we can expect around 6% to 7% move to the upside after earnings, if that happen, that would move GOOGL to around 220 to the upside or rather around the 216-217 range, but if the earnings goes to the downside, we could be seeing GOOGL moving back into the area of support that it was testing at around 191 to 188 range.
If we were to look at GOOGL as a business, there is no red flags, and with the weekly chart, we are also seeing an overall beautiful uptrend for the bulls. That would be a very attractive weekly uptrend consolidation highs of the range.
The bulls are possibly looking for the breakout and the price target of 220 might be conservative given that their PEG ratio right now at $200 is 1.43 which is considered the cheapest for a tech company.
On the monthly chart, the overall monthly have shown a beautiful month of expansion for GOOGL, if we were to play the earnings for tomorrow, I think a swing trades might be possible.
Summary
I would be thinking of some swing trades to take advantage of a possible 6-7% gains after its earnings, but I would still be holding GOOGL for the long term.
Overall I think GOOGL is considered cheap at its current share price given that it is having a low PE ratio for a tech company. I am expecting GOOGL to reduce its expenses then we might see a stronger earnings or possibly a surprise.
Appreciate if you could share your thoughts in the comment section whether you think GOOGL would give an earnings surprise if it manage to reduce its expenses.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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