Google parent Alphabet is set to report its third-quarter earnings after the market closes Wednesday. Here's what you need to know.
PROFIT: Analysts polled by FactSet expect Alphabet to report a profit of $37.27 billion in the third quarter, compared with a profit of $34.98 billion a year earlier.
EARNINGS PER SHARE: Alphabet is expected to report earnings of $3.01 a share, up from $2.87 a year prior.
REVENUE: Revenue is expected to grow to $127.94 billion from $102.35 billion, according to FactSet.
Shares were recently up 1.3% at $321.05, with the stock up 2.6% year-to-date.
WHAT TO WATCH:
--Google Cloud continues to grow as artificial intelligence drives compute demand well above existing supply. The company continues to convert its $514 billion cloud backlog into revenue, according to Truist analysts, and Anthropic's commitment of spending $200 billion over five years is beginning to flow through into revenue in the back half of this year. The earnings release also will represent Google's second quarter of recognizing external revenue from selling chips known as Tensor Processing Units, or TPUs. While the contribution remains comparatively small, it should ramp substantially in 2027, with BNP Paribas analysts modeling an $80 billion to $100 billion cumulative revenue opportunity through 2028 from the TPU business.
--The release comes after Google began rolling out its latest AI model, Gemini 4 Argon. Truist analysts wrote in a recent note that Argon's cybersecurity capabilities are Google's differentiating edge, with the model outscoring leading models from OpenAI and Anthropic on several benchmarks. "We read this as evidence Alphabet has closed the frontier-model gap," the analysts wrote. "That said, the more capable Gemini 4 model at competitive prices should help adoption but could pressure the margin/return on capex. Thus, higher volume and adoption will be needed to compensate for competitive pricing, in our view."
--Despite the excitement around AI and cloud, investors and analysts also will be looking for encouraging updates on the core search business. Mizuho analysts have flagged a downside risk from search, noting that Network impressions decelerated to 12% in the second quarter, likely as a result of AI queries replacing open web traffic. But BNP Paribas said recently that Google Search "continues to dominate traffic despite rising AI adoption," adding that "third-party data supports durable Search trends and continued Gemini adoption in 3Q."
Comments