Google Earnings Watch: YouTube Rebound, Cloud Growth, Gemini Launch

Analysts expect Alphabet to report its third-quarter earnings on Tuesday, with earnings expected to soar due in part because of easier comparisons between years. According to GOOGL's consensus estimates, YouTube's ad revenue growth will also improve.

Analysts expect the earnings report for the third quarter of the year to be released after the close of the markets. The EPS is expected to increase by 37%, to $1.46. Google's earnings rose by 17% in the second quarter of this year, ending five consecutive quarters of declining profit.

FactSet estimates that Google's gross revenue for Q3 will increase by 10%, to $76 billion.

Ad business is rebounding for GOOGL stock

Analysts predict core digital advertising revenue to rise 8.6%, reaching $59.1 billion. Mark Mahaney, an analyst at Evercore ISI, wrote to clients that "inter-quarter checks indicate a continued modest recovery in overall ad spend with a very consistent wallet share of internet search." He stated that "recent strikes in the industry" could lead to "linear advertising spend moving towards digital channels" (YouTube).

Analysts predict that YouTube advertising revenues will rise 10.7%, to $7.82 Billion. YouTube's ad revenues fell by 2% during the third quarter of 2022.

Google's management will be expected to comment on the growth of YouTube TV subscribers in light of its newly acquired streaming rights NFL Sunday Ticket. YouTube is facing increased competition from TikTok.

GOOGL Earnings: Cloud Growth Slows?

Google's cloud computing revenues are expected to increase by nearly 26%, to $8.64 Billion, compared with a 28% increase in Q2. Cloud revenue increased by 37% during the previous quarter.

Bank of America analyst Justin Post stated in a recent report that "we expect an acceleration of search and YouTube revenue, with YouTube improving slightly faster than search." "We believe the potential for EPS growth could be driven by higher than expected advertising growth, and the impact of cost management measures taken in the first half (lower growth in headcount)."

GOOGL Stock: Gemini Launch

Analysts expect Google to also provide an update regarding its artificial intelligence initiatives. This includes "Gemini," which is a large language model. Google will reportedly launch the AI model during the fourth quarter, which is expected compete with OpenAI's GPT-4. The building blocks for developing applications are large language models.

GOOGL shares rose just a little bit today on the stock exchange, to around 136. Google's big cap tech stock is up 53% for 2023, just before the earnings report.

According to IBD StockCheckup, GOOGL has a Relative strength rating of 95, out of the maximum 99 possible.