Categories Analysis, Technology

Key figures to note when Alphabet announces Q2 earnings results

It’s been a pretty bumpy ride for Alphabet (NASDAQ: GOOGL) over the past few weeks.  The US Justice Department recently said it was planning to relaunch an anti-trust probe into the firm. Separately, the calls to break down big tech firms have been louder than ever before.

With all these non-operational headwinds at play, Alphabet will need a solid quarter to revive investor confidence in the firm. The search giant is scheduled to report second-quarter financial results after the closing bell on July 25, Thursday. Here are the key figures investors will be looking for in the upcoming quarterly result.

google home
Photo by BENCE BOROS on Unsplash

Earnings estimate: Alphabet does not provide any forecasts, so all we have are street estimates. For the second quarter, analysts estimate earnings of $11.30 per share, compared to $4.54 per share it reported in the same quarter last year. However, the last quarter earnings included 4.34 billion euros in a one-time fine by the European Commission. Excluding the fine, the bottom-line would have been $11.75 per share, which is higher than this quarter’s estimate.

READ: It’s Google 1-0 Amazon in the European Smart Home market

Such a decline in adjusted earnings would be driven by weakening foreign currency, analysts predict.

In the trailing four quarters, Alphabet has surpassed earnings estimates on two occasions.

Google's parent Alphabet reports Q1 2019 earnings

Revenue estimate: Wall Street expects revenues to grow 17% to $38.17 billion. During the last reported quarter, the company’s revenue grew 17% to $36.3 billion, which was lower than $37.34 billion expected by the street. The top-line was hurt by a slowdown in advertising revenues, which takes us to the next key metric.

Advertising revenue: This metric is of paramount importance as it accounts for almost 85% of the company’s total revenues. However, there has been a marked slowdown in its growth, which has been worrying investors (see image). Year-over-year digital advertising revenue growth has steadily declined from 24.4% in the first quarter of last year to 15.3% in the first quarter of this year.

google advertising revenue trend

Since the company does not give a proper split of its advertising revenues, it is difficult to pinpoint a reason. The management has also been pretty close-mouthed about the deceleration.   

Other revenues: This includes revenues from sales of hardware and services such as Google Cloud and Google Play. During the last quarter, there was a slowdown in this segment, due to weak sales of Pixel smartphone. Investors will be watching whether it was a one-time event or an emerging trend.

google other revenues quarterly growth

During the earnings conference call: During the conference call, look out for management comments on the weakening ad revenues, potential anti-trust actions and any updates related to the investments going into “Other bets.”

GOOGL stock has gained just 7.6% in the year-to-date period, compared to 18% by the S&P 500 index. The stock has a Strong Buy rating with an average 12-month price target of $1334, an upside of 18% from Monday’s trading price.

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