Google-parent Alphabet Inc. (GOOGL Quick QuoteGOOGL - Free Report) is set to kick off the big tech earnings on Apr 28, after market close. All eyes will be on the search-engine giant’s first-quarter results, which in all probability will give a preview of the impact of the economic slump triggered by the coronavirus pandemic.

 

Alphabet has traditionally never seen an earnings decline during times of crisis. For instance, the company remained mostly unscathed during the 2008 financial crisis, with earnings increasing 0.2% in the year, and advancing at a double-digit growth rate in 2009. But the same cannot be said about the coronavirus-marred first quarter of this year.

 

Primarily, digital-ad downturn in the wake of the coronavirus outbreak has surely taken a toll on the company’s advertisement revenues. After all, Alphabet has the biggest share (30%) in the $110-billion online advertising market, and such ads made up nearly 83% of the company’s revenues in 2019. 

 

So, why is Alphabet’s ad revenues expected to have declined in the first quarter? This is because the company’s diverse big brand advertisers and businesses are now saving up on promotional spending as consumer spending on discretionary items has taken a hit in the wake of the widespread lockdowns due to the pandemic. In fact, unemployment rate is ticking up. U.S. jobless claims have surpassed the 26-million mark in recent times and have also crossed job additions since the Great Recession.

 

 

Alphabet’s revenues from the advertising segment are also likely to have suffered in the first quarter as the company had banned advertisements related to sensitive issues like the virus outbreak.

 

But analysts still expect the company’s overall revenues to improve in the first quarter, and one of the reasons is that the pandemic only began to hurt the global economy, and subsequently ad budgets starting late February. Moreover, Alphabet’s strengthening cloud unit has been aiding substantial revenue growth. The segment is gaining the most as lockdowns have compelled people to work or learn from home. And with this new model, most companies need to move a bulk portion of their workloads to the cloud.

 

Thus, the Zacks Consensus Estimate for first-quarter revenues is pegged at $33.06 billion, suggesting a 12.16% rise from the year-ago level.  But let’s admit that performance during the coronavirus-marred quarter won’t be as encouraging as other quarters. Nevertheless, analysts expect the company’s first-quarter earnings per share to drop to $10.97 from $11.90 a year ago.

 

 

What’s more, the Zack Rank 3 (Hold) company has an Earnings ESP of -5.51%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Discouraging results, no doubt, will lead to a drop in the share price. Thus, the company’s earnings growth rate for the next quarter is expected to decline 34.2% against the Internet - Services industry’s estimated return of 2.9%. The company’s earnings growth rate for the current year is also projected to decline 13%. By the way, shares of Alphabet have already declined 5.1% so far this year.

 

 

 

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.