Alphabet (NASDAQ:GOOG), the parent company of Google, is set to report its fiscal second-quarter earnings after the bell on Tuesday. This will give Wall Street a closer look at the state of the digital advertising market and whether the hype around generative AI is translating into revenue growth for the tech giant. In the first quarter, Alphabet made headlines by initiating its first dividend of $0.20 per share and authorizing stock repurchases of $70 billion.
Year-to-date, Alphabet shares are up 30%, outperforming rivals like Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN), which have seen gains of 18% and 22% respectively. All three companies have been heavily investing in building out their generative AI capabilities, with a focus on data centers that can support the AI models offered through their cloud platforms.
Analysts are expecting earnings per share of $1.85 on revenue of $84.35 billion for the quarter, representing a significant increase from the same period last year when earnings per share were $1.44 on revenue of $74.6 billion. Advertising revenue is projected to reach $64.5 billion, up from $58.1 billion in the previous year, with growth expected in Google Search & other, YouTube ads, and Google Network revenue.
The positive outlook for advertising revenue could also benefit Meta, a competitor in the ad business. Analysts like Brent Thill from Jefferies and Scott Devitt from Wedbush are optimistic about advertising spending, with expectations for continued strength in Google Search.
In terms of Google Cloud revenue, Wall Street is anticipating $10.1 billion with an operating income of $982.2 million. Despite trailing behind Amazon and Microsoft in the cloud space, Google is banking on its investments in generative AI to drive revenue and customer acquisition in the future.
However, the timeline for when AI will start generating significant revenue for Google’s Cloud business remains uncertain. Analysts like Thill believe that material AI revenue is more likely to be seen in 2025-26. Devitt sees potential in AI search overviews for driving engagement and improving Search monetization over time.
While generative AI is expected to be a key theme this earnings season, its impact on companies’ bottom lines is still unclear. As the first among Big Tech companies to report earnings, Google’s results will provide insights into whether generative AI is translating into meaningful revenue.
Source: https://finance.yahoo.com/news/google-parent-alphabet-to-report-q2-earnings-tuesday-with-ai-ad-spending-front-and-center-191643704.html
