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Will Google's Ad Business Drive Q1 Growth?

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Shares of Google parent Alphabet Inc. (GOOGL - Free Report) opened lower on Friday, just one trading day before the company is set to report its first-quarter financial results. This could signal that investors are worried Alphabet will underwhelm on Monday afternoon, which means now might be time to dive deeper into the company’s current estimates to see what to expect.

Alphabet has seen its stock price sink over 7% in the last 12 weeks. The company’s decline can be attributed to the overall market downturn along with worries that Google’s search business might eventually face government oversight after Facebook’s data scandal grabbed Congressional attention.

Google grew into a tech powerhouse based mostly on its domination of the internet search engine industry. Today, Google is one of multiple subsidiaries of Alphabet. But while the company’s other business units, including its Google Play Store and Google Cloud offerings, have helped to diversify the company, Google’s search business is still far and away Alphabet’s primary revenue driver.

Furthermore, any fears that possible government intervention might harm Google’s search business are much more long-term. Therefore, Alphabet is likely to keep on expanding both its top and bottom lines until there is real reason to believe otherwise.

Q1 Outlook

Alphabet’s Q1 earnings are expected to climb by 19.2% to reach $9.21 per share, based on our current Zacks Consensus Estimates. Meanwhile, Alphabet’s overall Q1 revenues are projected to pop by 20.7% to hit $24.29 billion. Investors should note that our revenue estimate excludes Google Network Members revenues.

With that said, earnings and revenue are just two of the many things investors might look for when Alphabet reports after the closing bell on Monday, April 23. Investors will also want to see how the company’s specific units are expected to perform, and its advertising business is clearly still the most important.  

Luckily, we can turn to our exclusive non-financial metrics consensus estimate file to give investors a better understanding of how Google’s vitally important ad business is expected to perform in the first quarter.

The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

Google’s ad revenues are projected to surge by roughly 20.5% in the first quarter to hit $25.79 billion. Last quarter, Alphabet’s advertising revenues climbed roughly 21.6% to hit $27.23 billion, accounting for roughly 85% of total Q4 revenues. Investors should note that a strong holiday season is likely the cause of this expected sequential downturn.

For more estimates ahead of Alphabet’s Q1 report, check out: 3 Key Estimates for Google's Q1 Earnings Report.

Also make sure to check back here for our full analysis of Alphabet’s actual results on Monday, April 23!

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