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Alphabet Inc, Google’s parent company, reports their Q3 earnings results after the closing bell on Tuesday night, October 29, 2024.
The tech giant is expected to report strong growth on top and bottom lines for the third quarter. GOOGL stock rose 2% on the day ahead of its upcoming earnings.
WHAT SHOULD TRADERS BE FOCUSED ON?
With Alphabet Inc.’s earnings approaching, traders should zero in on core areas to evaluate the company’s momentum and future outlook. Here’s what you need to know heading into Alphabet’s earnings.
- Revenue growth: Alphabet achieved revenue of $84.74 billion in the latest quarter, a 14% year-over-year increase driven by Google Search, YouTube Ads, and Google Cloud.
- Profit margins: Alphabet’s operating margin improved to 32.36%, reflecting effective cost management and operational efficiency.
- Advertising revenue: Google Search and YouTube both saw growth, with AI enhancements boosting search engagement, and YouTube seeing gains in watch time, Connected TV viewership, and Shorts monetization.
- Cloud business performance: Google Cloud exceeded $10 billion in quarterly revenue and reached $1 billion in operating profit, growing 28.84% due to rising demand for AI and generative AI infrastructure.
- Guidance and outlook: Alphabet is focusing on cost efficiency and prioritizing investments in high-growth areas, particularly AI, to drive future growth.
- Regulatory and legal issues: Alphabet faces various global regulatory challenges, including investigations and lawsuits related to AI competition, free speech concerns, and partnerships with rival firms.
MARKET EXPECTATIONS
Earnings Per Share (EPS): $1.84
Revenue: $86.23 bn
Despite a cooling AI market, investors remain keen on Alphabet’s progress in integrating AI across its platforms, especially following the merger of Google Research and Google DeepMind to drive AI innovation.
While Alphabet exceeded Q2 earnings expectations, its stock dipped by 5% on July 24 due to cautious guidance, sparking concerns over returns on its growing AI investments, with R&D expenses reaching $23.8 bn as of June 30.
Like a lot of growth stocks in the last three months, GOOGL has underperformed as multiple worries loom over growth stocks and the broader stock market in general, which has tempered expectations coming into Q3 earnings results.
GOOGL stock is prone to strong volatility in response to earnings. Alphabet’s long-term outlook should be carefully considered by traders and investors, and they should be ready for sudden movements during the earnings announcement.
TECHNICAL ANALYSIS
Since August 6, GOOGL has been trading in a range, reaching a low of $148 before rebounding and stabilizing near $160. Traders are eyeing key levels as earnings approach. Positive results could lift the stock toward the next resistance around $172, while weaker-than-expected figures may increase selling pressure, potentially moving the stock toward support near $153.4. Observing how the stock reacts around these levels can provide insights into market sentiment following the earnings release.
