Alphabet (GOOG, GOOGL) is set to announce its first-quarter earnings after the closing bell on Tuesday. As one of the world’s most influential tech giants, investors are eagerly anticipating the results. This earnings report is especially significant as the Google parent’s AI plans will take center stage, with investors also closely watching for updates on the company’s ad business and cost-cutting efforts.

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Overview

Over the last few months, Google’s AI capabilities have been questioned by some as the company’s AI chatbot, Bard, has failed to impress. Meanwhile, Microsoft (MSFT) and its mega-investment in Open AI — which developed ChatGPT — has gained substantial public attention. The tables have begun to turn on Google, as investors have logged concerns over the search giant’s ability to compete in the rapidly-escalating AI race. Worries that have resulted in stock price drops as recently as this month.

Still, Alphabet shares are up just over 20% so far this year, outpacing the Nasdaq’s 14% rise over that period.

Expectations

Here’s what analysts are expecting to see out of Alphabet, according to data compiled by Bloomberg:

• Revenue: $68.96 billion
• EPS: $1.08
• Google Ad Revenue: $53.75 billion
• YouTube Ad Revenue: $6.64 billion

The first quarter is expected to be a solid quarter for Google, and some analysts say the search giant, for all the noise of the last few months, is set to do well in AI.

AI Plans

Google has made AI a core focus, with the company aiming to lead the way in machine learning and neural networks. This focus has led to numerous AI-powered products, such as Google Assistant and Google Translate.

Despite recent concerns, Google remains well positioned in AI, with a vast and growing dataset and highly skilled researchers. Google’s AI capabilities have already improved many of its products, from search results to virtual assistants, and the company plans to integrate AI into even more areas of its business.

Ad Business

Google’s ad business is one of its most significant sources of revenue, with the search giant generating over $50 billion in ad revenue in 2020. YouTube, which is also owned by Google, has also become an increasingly important part of the company’s ad business, with revenue topping $6 billion in 2020.

Investors will be closely watching Google’s ad business, hoping to see continued growth and innovation in this area. The recent rise of ad-blocking technology and privacy concerns has made the digital advertising industry increasingly challenging, and Google will need to continue to adapt to remain successful.

Cost Cutting

Google, like much of tech, has been cutting costs aggressively this year, with the company announcing plans to cut 12,000 jobs in January. These cuts have been part of a broader effort to streamline the company and make it more efficient.

Analysts have generally been positive on Google’s cost-cutting plans, with many seeing them as necessary steps to maintain the company’s profitability and competitiveness. However, some investors have expressed concern that Google could be doing more to reduce costs, and will be watching for updates on this front.

Analyst Expectations

Analysts have generally been bullish on Alphabet, with most maintaining Buy or Outperform ratings on the stock. Raymond James analyst Aaron Kessler wrote in a note to clients on April 23 that the firm maintains a “positive” view on the company’s cost-cutting plans, though notes some investors would perhaps prefer even more aggressive action from the company.

On AI, Kessler wrote: “While early, we believe Google remains well positioned in AI as well.” Kessler maintains an Outperform rating on Alphabet shares. Bank of America analysts Justin Post and Joanna Zhao have also maintained a Buy rating on the stock, writing in a note on April 20 that they expect a constructive tone on AI integration into search and see Alphabet as a more defensive, self-help stock in the Internet group in 2023 with more relative earnings stability given expense flexibility, healthy margins, and the opportunity to support the stock with buybacks.

Conclusion

As Alphabet prepares to announce its first-quarter earnings, investors will be closely watching for updates on the company’s AI plans, ad business, and cost-cutting efforts. While recent concerns have led to drops in the stock price, many analysts remain optimistic about the company’s prospects, particularly in the area of AI. Alphabet’s commitment to innovation and adaptation has made it one of the world’s most successful companies, and investors will be hoping to see continued growth and success in the coming years.

FAQs

1. What is Alphabet’s primary source of revenue?

• Google’s ad business is Alphabet’s primary source of revenue, generating over $50 billion in ad revenue in 2020.

2. What has been the impact of AI on Alphabet’s business?

• Alphabet has made AI a core focus, with the company aiming to lead the way in machine learning and neural networks. While recent concerns have led to drops in the stock price, many analysts remain optimistic about the company’s prospects, particularly in the area of AI.

3. How has Alphabet been cutting costs?

• Alphabet has been cutting costs aggressively this year, with the company announcing plans to cut 12,000 jobs in January. These cuts have been part of a broader effort to streamline the company and make it more efficient.

4. What are analysts’ expectations for Alphabet’s Q1 earnings?

• Analysts are expecting to see revenue of $68.96 billion and EPS of $1.08, with Google Ad Revenue of $53.75 billion and YouTube Ad Revenue of $6.64 billion.

5. How have investors responded to Alphabet’s recent challenges?

• While recent concerns have led to drops in the stock price, Alphabet shares are up just over 20% so far this year, outpacing the Nasdaq’s 14% rise over that period. Many analysts remain optimistic about the company’s prospects, particularly in the area of AI.