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Alphabet (GOOGL) Down 7.4% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Alphabet (GOOGL - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Alphabet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Alphabet Earnings Miss Q1 Estimates
Alphabet’s first-quarter 2022 earnings of $24.62 per share missed the Zacks Consensus Estimate by 4.2%. The figure declined 6.3% year over year.
Revenues of $68.01 billion increased 23% year over year (26% at constant currency).
Net revenues, excluding total traffic acquisition costs or TAC (TAC is the portion of revenues shared with Google’s partners, and amounts paid to distribution partners and others, who direct traffic to the Google website), were $56.02 billion, which lagged the consensus mark of $56.17 billion. The figure rose 22.8% from the year-ago quarter.
TAC of $11.9 billion was up 23.5% year over year.
Top-line growth was driven by the solid momentum across the company’s search and cloud businesses. Strong segmental performance contributed well.
However, the company witnessed sluggishness in advertisement spending and slow growth in YouTube in the reported quarter.
The ongoing tension between Russia and Ukraine, which has resulted in the suspension of advertisement activities in Russia, is expected to be a headwind for the company.
Nevertheless, Alphabet’s growing investments in AI and the expanding cloud services portfolio, which are expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to instill investors’ optimism in the stock in the days ahead.
Segments in Detail
The company reports revenues under Google Services, Google Cloud and Other Bets.
Google Services
Revenues from the Google services business increased 20.1% year over year to $61.5 billion, accounting for 90.4% of total revenues.
Under the services business, search revenues from Google-owned sites increased 24.3% year over year to $39.6 billion.
YouTube’s advertising revenues grew 14.4% year over year to $6.9 billion, while Network advertising revenues increased 20.2% to $8.2 billion.
Total Google advertising revenues grew 22.3% year over year to $54.7 billion and accounted for 80.4% of the total revenues.
Google’s Other revenues, consisting of Google Play and YouTube non-advertising revenues, were $6.8 billion for the first quarter, up 4.9% year over year.
Google Cloud
Google Cloud revenues rose 43.8% year over year to $5.8 billion, accounting for 8.6% of the quarterly revenues.
Other Bets
Other Bets’ revenues were $440 million, up 122.2% year over year, accounting for 0.6% of the total first-quarter revenues.
Regional Details
EMEA (29.9% of total revenues): The company generated $20.3 billion of revenues from the region, up 19% year over year.
APAC (17.4% of total revenues): The region generated $11.8 billion in revenues, up 13% from the year-ago quarter.
Other Americas (5.6% of total revenues): The region generated $3.8 billion in revenues, up 32% on a year-over-year basis.
United States (46.7% of total revenues): The company generated $31.7 billion of revenues from the region, which increased 27% from the prior-year quarter.
Operating Details
Costs and operating expenses were $47.9 billion, up 23.2% year over year. As a percentage of revenues, the figure expanded 10 basis points (bps) from the year-ago quarter.
The operating margin was 30%, which remained flat year over year. Segment-wise, Google Services’ operating margin of 37.3% contracted 90 bps from the prior-year quarter.
Google Cloud reported a loss of $931 million compared to a loss of $974 million in the year-ago quarter.
Other Bets reported a loss of $1.15 billion compared to a loss of $1.14 billion in the prior-year quarter.
Balance Sheet
As of Mar 31, 2022, cash and cash equivalents, and marketable securities were $133.9 billion, down from $139.6 billion as of Dec 31, 2021.
Long-term debt was $14.82 billion at the end of the reported quarter compared with $14.79 billion at the end of the previous quarter.
The company generated $25.1 billion in cash from operations in first-quarter 2022 compared with $24.9 billion in fourth-quarter 2021.
It spent $9.8 billion on capex, netting a free cash flow of $15.3 billion in the reported quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Alphabet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Alphabet (GOOGL) Down 7.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Alphabet (GOOGL - Free Report) . Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Alphabet due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Alphabet Earnings Miss Q1 Estimates
Alphabet’s first-quarter 2022 earnings of $24.62 per share missed the Zacks Consensus Estimate by 4.2%. The figure declined 6.3% year over year.
Revenues of $68.01 billion increased 23% year over year (26% at constant currency).
Net revenues, excluding total traffic acquisition costs or TAC (TAC is the portion of revenues shared with Google’s partners, and amounts paid to distribution partners and others, who direct traffic to the Google website), were $56.02 billion, which lagged the consensus mark of $56.17 billion. The figure rose 22.8% from the year-ago quarter.
TAC of $11.9 billion was up 23.5% year over year.
Top-line growth was driven by the solid momentum across the company’s search and cloud businesses. Strong segmental performance contributed well.
However, the company witnessed sluggishness in advertisement spending and slow growth in YouTube in the reported quarter.
The ongoing tension between Russia and Ukraine, which has resulted in the suspension of advertisement activities in Russia, is expected to be a headwind for the company.
Nevertheless, Alphabet’s growing investments in AI and the expanding cloud services portfolio, which are expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to instill investors’ optimism in the stock in the days ahead.
Segments in Detail
The company reports revenues under Google Services, Google Cloud and Other Bets.
Google Services
Revenues from the Google services business increased 20.1% year over year to $61.5 billion, accounting for 90.4% of total revenues.
Under the services business, search revenues from Google-owned sites increased 24.3% year over year to $39.6 billion.
YouTube’s advertising revenues grew 14.4% year over year to $6.9 billion, while Network advertising revenues increased 20.2% to $8.2 billion.
Total Google advertising revenues grew 22.3% year over year to $54.7 billion and accounted for 80.4% of the total revenues.
Google’s Other revenues, consisting of Google Play and YouTube non-advertising revenues, were $6.8 billion for the first quarter, up 4.9% year over year.
Google Cloud
Google Cloud revenues rose 43.8% year over year to $5.8 billion, accounting for 8.6% of the quarterly revenues.
Other Bets
Other Bets’ revenues were $440 million, up 122.2% year over year, accounting for 0.6% of the total first-quarter revenues.
Regional Details
EMEA (29.9% of total revenues): The company generated $20.3 billion of revenues from the region, up 19% year over year.
APAC (17.4% of total revenues): The region generated $11.8 billion in revenues, up 13% from the year-ago quarter.
Other Americas (5.6% of total revenues): The region generated $3.8 billion in revenues, up 32% on a year-over-year basis.
United States (46.7% of total revenues): The company generated $31.7 billion of revenues from the region, which increased 27% from the prior-year quarter.
Operating Details
Costs and operating expenses were $47.9 billion, up 23.2% year over year. As a percentage of revenues, the figure expanded 10 basis points (bps) from the year-ago quarter.
The operating margin was 30%, which remained flat year over year. Segment-wise, Google Services’ operating margin of 37.3% contracted 90 bps from the prior-year quarter.
Google Cloud reported a loss of $931 million compared to a loss of $974 million in the year-ago quarter.
Other Bets reported a loss of $1.15 billion compared to a loss of $1.14 billion in the prior-year quarter.
Balance Sheet
As of Mar 31, 2022, cash and cash equivalents, and marketable securities were $133.9 billion, down from $139.6 billion as of Dec 31, 2021.
Long-term debt was $14.82 billion at the end of the reported quarter compared with $14.79 billion at the end of the previous quarter.
The company generated $25.1 billion in cash from operations in first-quarter 2022 compared with $24.9 billion in fourth-quarter 2021.
It spent $9.8 billion on capex, netting a free cash flow of $15.3 billion in the reported quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Alphabet has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.