Alphabet Q3 results: Cloud sales to help weather AI tailwinds

Alphabet (GOOGL) will deliver its Q3 earnings after the closing bell on Tuesday. We preview what the markets are expecting heading into the results.

What are analysts forecasting for Alphabet’s Q3 results?

Revenue (ex-TAC) EPS Ad. revenue 4Q EPS Guidance Estimate $63.04B (10.1%) $1.44 (36.6%) $58.9B (8.1%) $1.64 (55.79%) (Source: Bloomberg)

According to data from Bloomberg, broker analysts expect a solid financial performance from Alphabet in Q3, driven by a continued recovery in ad revenues. 2022 saw a historic drop in sales generated from advertising for Alphabet, with the company’s growth this quarter likely to be bolstered by favourable base effects. According to the Bloomberg data, revenue (excluding traffic acquisition costs) is tipped to rise 10.1% to $63.04B; ad revenues are expected to lift 8.1% to $58.9B. The tech giant’s top-line recovery is projected to underpin a 36.6% rebound in earnings per share to $1.44.

The revival in advertising revenue comes despite crosswinds from the emergence of artificial intelligence. On the one hand, Alphabet is moving to integrate AI technology into its products and stands to benefit from its AI trading service. However, the emergence of ChatGPT and other competitor products threatens to disrupt Alphabet’s market dominance achieved through Google.

Data compiled by Bloomberg suggest analysts expect continued earnings recovery in the short term: the consensus estimate for Q4 EPS guidance is $1.64, which represents a 55.8% rise.

Broker recommendations and consensus price target

According to surveys conducted by Bloomberg, the broker community remains very bullish toward Alphabet’s stock. Of 62 analysts, 54 favour buying the stock, with the remaining suggesting a hold. The consensus price target is at a meaningful premium of $153.11.

Alphabet share price: technical analysis
Alphabet’s share price has trended higher this year, supported by the multiple expansion inflated by the hype surrounding artificial intelligence. More recently, upside momentum has slowed, in significant part due to the recent rise in bond yields that have hurt tech stocks. 

(Past performance is not a reliable indicator of future results)