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Alphabet Earnings: What to Expect?

Alphabet is due to release Q3 results after the closing bell today. So, what should investors be expecting? A disappointing performance like that of Q1 which sent the share price tumbling? Or the knockout earnings performance of Q2 which lifted the stocks some 10%?

* Revenue expectation: $40.3 billion
* EPS expectation: $12.28

Ad Revenue
As always investors should focus on revenue growth. Weaker than forecast revenue from slowing ads sales spooked investors in Q1 (17% growth). However, a better than forecast figure in Q2 (19% growth) helped the stock surge. The key growth drivers were the usual catalysts; mobile search, YouTube and Google cloud. 

It is more important than ever that Alphabet shows investors that its revenue generator remains intact, at a time when it is facing an intense antitrust probe. There are no signs that revenue growth is slowing. Analysts are expecting Q3 revenue of $40.3 billion, growth of 19% compared to same quarter a year earlier. Shares have been on the rise recently, possibly in anticipation of solid revenue figures. 

Q3 results come as Google faces antitrust probes by Congress, the Department of Justice and nearly all US states. The antitrust probes are focused on Googles advertising business, its primary source of revenue.

Furthermore, there is the growing competitive threat from the likes of Snap and Amazon. Particularly the latter, whose increasing market share which is threatening Alphabet’s stronghold in the digital advertising market.

Given the high level of scrutiny, a slight miss in revenue could unnerve investors and send the stock sharply lower.

Other points worth watching:
• Paid clicks to see whether traffic volumes are increasing – a larger audience can offset and ad price drop.
• Regulatory barriers in Waymo ride hailing service
• Strong dollar headwinds negatively impacting both revenue and operating income
• How much is being spent on clod service to compete with Microsoft & Amazon cloud services?

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