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

Google parent Alphabet (GOOGL) will report third-quarter results Tuesday with analysts expecting earnings to pop on easier year-over-year comparisons. YouTube’s advertising revenue growth should also rebound, according to consensus estimates for GOOGL stock.

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Analysts project EPS to jump 37% to $1.46 when the internet search giant reports earnings for the September quarter after the market close. Google earnings rose 17%, snapping five straight quarters of declining profits in the June quarter.

Google’s Q3 gross revenue is expected to rise 10% to $76 billion, according to FactSet data.

GOOGL Stock: Ad Business Rebounding

Analysts expect core digital ad revenue will climb 8.6% to $59.1 billion. In a note to clients, Evercore ISI analyst Mark Mahaney said “intra-quarter checks” point to “continued modest recovery in the overall ad spending environment with a highly consistent wallet share for internet search.” He said the “recent industry strikes” could drive “linear ad spend towards digital channels (YouTube).”

Analysts expect YouTube advertising revenue to rise 10.7% to $7.82 billion. YouTube ad revenue fell 2% in the September quarter of 2022.

Google management is expected to comment on YouTube TV subscriber growth amid newly acquired streaming rights for NFL Sunday Ticket. YouTube has been facing stiffer competition from TikTok.

GOOGL Earnings: Cloud Growth Slows?

Meanwhile, Google’s cloud computing revenue is expected to grow nearly 26% to $8.64 billion, compared to 28% growth in Q2. Cloud revenue jumped 37% in the year-earlier quarter.

“We expect an acceleration in search and YouTube revenues, with YouTube improving at a slightly faster pace than search,” Bank of America analyst Justin Post said in a report. “We think the opportunity for EPS upside could be driven by higher-than-expected advertising growth and the impact of first half cost management steps (lower head count growth).”

GOOGL Stock: Gemini Launch

Analysts also expect Google to provide an update on its artificial intelligence initiatives, especially “Gemini,” a new large language model. Google is reportedly launching the AI model in the fourth quarter which is expected to compete with startup OpenAI’s GPT-4. Large language models provide the building blocks to develop applications.

On the stock market today, GOOGL stock rose a fraction to near 136. Heading into the Google earnings report, the big cap tech stock has gained 53% in 2023.

Also, GOOGL stock holds a Relative Strength Rating of 95 out of a best-possible 99, according to IBD Stock Checkup.

Follow Reinhardt Krause on X, formerly called Twitter,  @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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