Alphabet Q2 Earnings Preview: Earnings Estimates, Artificial Intelligence Growth And Other Key Factors To Watch

Technology giant Alphabet Inc GOOGGOOGL is set to report second quarter financial results after market close Tuesday.

Here’s a look at the earnings estimates from analysts and the key factors investors will be watching.

Earnings Estimates: Analysts are expecting Alphabet to report second-quarter earnings per share of $1.34, according to data from Benzinga Pro.

The revenue estimate from analysts is $72.78 billion, which would be a 4% increase year-over-year.

In the first quarter, Alphabet reported revenue of $69.79 billion, which was up 3% year-over-year and beat the Street estimate.

Alphabet has missed earnings per share estimates in four of the last five quarters, according to Benzinga Pro. The company has also missed revenue estimates from analysts in two of the last four quarters.

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Key Items to Watch: In its first quarter financial results, Alphabet highlighted its opportunities in cloud and artificial intelligence.

“We are pleased with our business performance in the first quarter, with Search performing well and momentum in Cloud. We introduced important product updates anchored in deep computer science and AI,” Alphabet CEO Sundar Pichai said at the time.

Alphabet said it was working to accelerate its progress in artificial intelligence.

“Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation,” Pichai also said.

As artificial intelligence becomes a hot topic and investors assign higher premiums to companies expanding with AI, Alphabet's quarterly performance will be under intense scrutiny.

While Alphabet faces competition in the artificial intelligence and search segment from Microsoft Corporation MSFT, it could also have competition from Apple Inc AAPL.

New reports point to Apple building out its large language models and artificial intelligence efforts with a ChatGPT-style tool that can compete with ChatGPT from Microsoft and Bard, which is owned by Alphabet.

While Google has dominated the search market, there was concern earlier this year that Microsoft’s investments in ChatGPT parent company OpenAI and integration into its Bing search engine could take market share from the Alphabet unit.

As Apple pushes further into generative AI, there could be concerns that it adds to the competition Alphabet is already seeing in the sector.

In the first quarter, Alphabet saw its Search unit increase revenue year-over-year, while YouTube Ads and Google Network revenue fell. These segments will be watched to see if their growth can rebound and bring the overall advertising revenue up on a year-over-year basis.

Google Cloud revenue was $7.5 billion in the first quarter, up from $5.8 billion year-over-year. 

GOOG Price Action: Shares of Alphabet are trading flat at $121.93 on Tuesday, versus a 52-week trading range of $83.46 to $129.55.

Shares of the technology company are up 36% year-to-date in 2023.

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