Twitter – Alphabet Reports Earnings Tuesday. Here’s What to Expect.
The powerful revenue growth reported by
last week was a positive signal for Google-parent
which reports second-quarter earnings Tuesday after the closing bell. A rebound in digital advertising helped the two social media businesses and Alphabet’s ad business is likely to enjoy its own big boost.
For digital advertising, last year’s June quarter was one of the weakest periods in recent memory. Amid the Covid-19 pandemic, advertisers pulled back on spending, leaving few digital ad companies unscathed.
Wall Street expects Alphabet (ticker: GOOGL) to report second-quarter earnings of $19.35 a share on revenue of $56.2 billion. That amounts to earnings growth of 91% and an increase in revenue of nearly 50%. A year ago, per-share profit was down 13%, while revenue was down 1.7%.
“Given Google’s global footprint it is worth noting that nearly all advertising sectors are on pace to exceed our expectations for the quarter,” Credit Suisse analyst
Excluding traffic acquisition costs, or TAC, analysts expect revenue of $46.1 billion.
For Alphabet’s Google advertising business itself, Wall Street expects second-quarter gross revenue of $44.9 billion, including YouTube’s contribution of about $6.3 billion.
“I think Google’s results on search will be pretty strong,” Baird technology strategist Ted Mortonson said. “Other than that, it’s somewhat of a seasonal period on advertising going into summer.”
Wedbush analyst Ygal Arounian said he is expecting strong second-quarter results, in part powered by Google’s recent investments in its commerce platform. As the company continues to develop its capabilities, it can better compete for e-commerce search advertising dollars. He also pointed out that Google’s partnership with
(SHOP) could improve its e-commerce search ad business.
Though it is still early to gauge the impact of a recent change to
‘s (AAPL) ad tracking technology, it doesn’t appear Alphabet will be hurt. In fact, the change could have a positive impact; MKM Partners analyst
recently wrote that his industry checks have showed some advertising money moving to Alphabet’s Android operating system from Apple’s iOS as a result of the tracking changes. Rivals such as
(FB) may be at more risk.
Investors and analysts closely watch Google’s Cloud unit, although it is a relatively small segment. The business is expected to generate second-quarter revenue of $4.3 billion, a gain of 44% compared with a year ago. Analysts model a second-quarter operating loss of $1.3 billion for the segment.
J.P. Morgan analyst
wrote in a note that he expects the cloud unit’s growth to remain at 40% or more as its losses shrink.
Of the analysts that cover Alphabet, 43 rate shares at Buy and two rate the stock at Hold. There are no sell ratings. The average target price is $2,846, 6% above the stock’s recent close.
Shares of Alphabet have climbed 53% this year, while the
index is up 18%.