A month has gone by since the last earnings report for Alphabet (GOOGL Quick QuoteGOOGL - Free Report) . Shares have lost about 3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Alphabet Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Alphabet’s third-quarter 2024 earnings of $2.12 per share beat the Zacks Consensus Estimate by 15.85%. The figure grew 37% year over year.

GOOGL’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 11.84%.

Revenues of $88.3 billion increased 15% year over year (16% at constant currency).

Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and the amount paid to distribution partners and others who direct traffic to Google’s website), were $74.549 billion, which surpassed the consensus mark by 2.34%. The figure rose 16.4% year over year.
 
TAC of $13.719 billion rose 8.5% year over year.

GOOGL’s Top Line Rides on Search, YouTube & Cloud Growth

Google Services revenues increased 12.5% year over year to $76.51 billion and accounted for 86.7% of the total revenues. The figure beat the Zacks Consensus Estimate by 2.1%.

Search and other revenues increased 12.2% year over year to $49.385 billion, surpassing the Zacks Consensus Estimate by 1.12%.

YouTube’s advertising revenues improved 12% year over year to $8.921 billion, beating the consensus mark by 0.71%.

Google Network revenues decreased 1.6% year over year to $7.548 billion but beat the consensus mark by 1.58%.

Google advertising revenues rose 10.4% year over year to $65.854 billion and accounted for 74.6% of the total revenues. The figure beat the consensus mark of by 0.97%.

Google subscriptions, platforms and devices revenues, formerly known as Google Other revenues, were $10.656 billion in the third quarter, up 27.8% year over year. The figure beat the consensus mark by 9.4%.

Google Cloud revenues surged 28.8% year over year to $11.35 billion and accounted for 12.9% of the quarter’s total revenues. The figure surpassed the Zacks Consensus Estimate by 4.02%.

Other Bets’ revenues were $388 million, up 30.6% year over year and accounted for 0.4% of the third-quarter revenues. The figure missed the consensus mark by 1.82%.

GOOGL’s Operating Margin Expands Y/Y

Costs and operating expenses were $59.747 billion, up 7.9% year over year. As a percentage of revenues, the figure declined 450 basis points (bps) on a year-over-year basis.

The operating margin was 32.3%, which expanded 450 bps year over year. 

Segment-wise, Google Services’ operating margin of 40.3% expanded 510 bps year over year.

Google Cloud’s operating income was $1.947 billion compared with $266 million reported in the year-ago quarter.

Other Bets reported a loss of $1.116 billion compared with a loss of $1.194 billion in the year-ago quarter.

Alphabet’s Balance Sheet Remains Strong

As of Sept. 30, 2024, cash, cash equivalents and marketable securities were $93.23 billion, down from $100.7 billion as of June 30, 2024.

Long-term debt was $12.297 billion as of Sept. 30, 2024 compared with $13.24 billion as of June 30, 2024.

Alphabet generated $30.698 billion of cash from operations in third-quarter 2024 compared with $26.6 billion in second-quarter 2024. GOOGL spent $13.061 billion on capital expenditure, netting a free cash flow of $17.637 billion in the reported quarter.

Solid liquidity is helping Alphabet maintain its dividend payout. In third-quarter 2024, GOOGL paid $2.5 billion in dividends and bought back shares worth $15.3 billion. Over the trailing 12 months, Alphabet has returned $70 billion to shareholders.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Alphabet has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.