Alphabet will issue its quarterly earnings data after the market closes on Tuesday, February 1st.
Alphabet is projected to report earnings of $26.85 per share, which would represent year-over-year growth of 20.4%. Meanwhile, the latest consensus estimate is calling for revenue of $59.3 billion, up 27.71% from the prior-year quarter.
Here's what to watch in Alphabet's upcoming report.
Search, Ad & Cloud Momentum to Aid Growth
Alphabet’s expanding ad services portfolio, robust search engine and improving search results are likely to have benefited the fourth-quarter performance.
The company’s continued efforts toward innovation of its search segment, which accounts for the major portion of the total revenues, is expected to have continued driving traffic on its platform in the to-be-reported quarter. The growing momentum across its mobile search is anticipated to have been another positive.
The introduction of AI-backed Multitask Unified Models technology is likely to have continued enhancing the search results to the unique queries of users.
Continued efforts to bolster the news ecosystem for the company’s Search and Discovery feed, and offering access to quality journalism are expected to have been positives.
Technical advancements in Google Assistant and Google Maps are expected to have driven the momentum across search further, which, in turn, is expected to have contributed well to the fourth-quarter performance of Google Services.
In addition to this, Google has been gaining traction with the Local Services ads. This is expected to get reflected in its fourth-quarter advertisement revenues. Moreover, solid momentum across retail, media & entertainment, finance, and travel categories is likely to have aided growth in its advertising business.
Coming to cloud prospects, Google has been significantly gaining momentum in the highly competitive cloud market on the back of its expanding cloud services portfolio and an increasing number of data centers. The impacts of this are expected to have driven the company’s cloud revenues in the quarter under review.
The solid adoption of Google Workspace is likely to have contributed well to the performance of the Google Cloud segment.
Android, Meet, Waymo & Google TV Efforts to Consider
Google’s strength across Android, digital payment, autonomous driving and healthcare is anticipated to have aided its fourth-quarter performance.
The growing momentum across Android 12 is likely to have benefited the company’s performance in the to-be-reported quarter. New widgets designed for personalizing phones, new dashboards and indicators for privacy management, and more gesture features, which aid in communication and controlling phones, are expected to have continued bolstering the adoption rate of Android 12.
In addition to this, Google’s persistent efforts to infuse its video conferencing software, Google Meet, with advanced features are likely to have bolstered its user base in the quarter to be reported. The company made advancements in Google Meet, with the help of which the software will notify users when there will be echo on video calls.
Further, growing prospects around Alphabet’s self-driving unit, Waymo, are expected to have been a major tailwind. In the fourth quarter, Waymo expanded its partnership with UPS to initiate autonomous freight movement with Waymo Via Class 8 trucks, which are powered by the fifth-generation Waymo Driver.
The impacts of the strengthening momentum across the company’s Early Rider program, which is currently available in San Francisco, CA, and Phoenix, AZ, are expected to get reflected in the upcoming results of the company.
Apart from this, the company’s strong Google TV efforts are expected to have driven its momentum in the streaming market in the quarter under review. Google introduced its first Chromecast streaming dongle for Google TV. Further, Mecool has launched its first Google TV streaming stick named Mecool KD3, which supports the over-the-top streaming service of Netflix.
Also, Realme introduced Realme 4K Smart Google TV streaming stick in India, which, in turn, is expected to have expanded the reach of Google TV in the country.
YouTube
YouTube has become the second most popular social media platform globally, and the platform's global user base amounted to approximately 2,240 million in 2021, projected to reach over 2,854 million users by 2025 with a CAGR of 5%.
According to the research firm, YouTube’s third-quarter advertising revenue was US$7.2 billion, a year-on-year increase of 43%. Moreover, Netflix’s Q3 revenue was US$7.5 billion, a year-on-year increase of 16%.
As YouTube continues to grow, Mirabaud Equity Research analyst Camplin said that it will “soon surpass Netflix and become the new king of streaming media.” He added in a report to investors that if YouTube were an independent company, its value would be between US$600 billion and US$700 billion. As a reference, the current market value of Netflix is $160 billion.
Alphabet also benefits from tailwinds leading to a robust prospective future with excellent financial performance and solid fundamentals. In addition, the pandemic brought digital transformation, which is expected to be further solidified with economic rebound resulting in a higher consumer spending on online retail, consequently, an increase in Digital advertisement.
Metaverse
Google entered the AR space ahead of time with its Google Glass initiative in 2013 but shortly ceased to flourish amid public outrage pertaining to its built-in data collection capabilities. However, the product is still in circulation as the company released an Enterprise Edition in 2019. Since then, the digital world has come a long way, and video recorders are now virtually embedded in all aspects of our lives through our smartphones. With Google Glass, Alphabet has been a pioneer of AR hardware, and a relaunch of the Google Glass will tell an entirely different story.
After Google's demo of Project Starline, a hyper-realistic 3D video booth, in 2021, Alphabet is now stepping into the Metaverse through its AR venture, Project Iris. The project is reportedly aiming at a 2024 launch date. In addition, the company acquired North, a pioneer in human-computer interfaces and smart glasses, in 2020 to focus on "ambient computing." In the recent earnings call, the CEO Sundar Pichai said:
For a while, we have deeply focused on thinking through computing for the long term. We've talked about ambient computing, and it's just a matter of time before, you know, beyond phones, you'll see other successful form factors. And AR is an exciting part of that future.
In a recent interview, the CEO also highlighted:
It’s always been obvious to me that computing over time will adapt to people than people adapting to computers. You won’t always interact with computing in a black rectangle in front of you. So, just like you speak to people, you see and interact, computers will become more immersive. They’ll be there when you need them to be. So, I have always been excited about the future of immersive computing, ambient computing, AR… The way I think about it is evolving computing in an immersive way with augmented reality.
Further, the company is developing a dedicated Operating System (OS) for its AR project under the former General Manager for OS in Meta Platforms, Mark Lucovsky. He posted job listings that point heavily towards Google's re-entry into this market segment. With Metaverse holding a big chunk of the future tech market, Google is uniquely positioned to leverage its powerhouse to grab a slice of that $800 billion market share.
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