Cloud Growth to Quantum Chips: Key Highlights in Google's 2024 Q4 Results
$Alphabet(GOOG)$
Q4 2024 Earnings Expectations
According to analysts' projections, Google's adjusted EPS for Q4 is expected to be $2.12, representing a 29.3% increase compared to $1.64 per share in the same period last year.
The revenue is expected to reach $96.71 billion. Among this, the total advertising revenue is projected to be $71.766 billion, Google Cloud revenue is expected to be $12.155 billion, and revenue from subscriptions, platforms, and devices is expected to be $11.994 billion.
Key Focus Areas for This Earnings Report
Advancements in the Gemini AI Model
CEO Sundar Pichai highlighted during the last earnings call that the company's full-stack approach to AI continues to solidify its leadership in the field. As of Q3, usage of AI tools like the Gemini API has grown nearly 40-fold in six months.
Strong Momentum in Google Cloud
This growth is largely driven by robust demand for AI infrastructure and generative AI solutions. Pichai noted in the previous quarter that the company's investments in AI are "paying off." Google Cloud revenue grew 35% year-over-year in Q3, reaching $11.4 billion.
Continued Growth in the Advertising Division
Analyst Oliver Rodzianko suggests that advertising revenue could grow approximately 12-12.5% year-over-year in Q4 2024. Election-related ad campaigns and seasonal peaks, such as Black Friday, Cyber Monday, and holiday spending, are expected to drive this growth.
YouTube continues to see strong growth in brand and direct-response advertising, with Shorts monetization gaining traction as it competes with TikTok and Instagram Reels. Over the past 12 months, YouTube's subscription revenue has officially surpassed $50 billion.
Breakthroughs in Quantum Computing
On December 10, 2024, Google announced a significant breakthrough in quantum chip technology, which became a catalyst for market sentiment. Quantum computing stocks emerged as a "dark horse" in the year-end U.S. stock market rally, with companies like $Quantum Computing Inc.(QUBT)$ and $Rigetti Computing(RGTI)$ surging tenfold.
Google's stock also hit consecutive all-time highs. However, as Google clarified in its announcement, quantum computing remains far from any commercial applications. Willow represents a critical step in the journey toward building a practical quantum computer.
Highlights from Q3 2024
On October 29, Alphabet released its Q3 earnings, once again surpassing Wall Street expectations, with shares rising over 5% in after-hours trading.
– Earnings per share: $2.12 vs. $1.83 expected
– Revenue: $88.27 billion vs. $86.44 billion expected
– Google Advertising: $65.9 billion vs. $65.5 billion
– YouTube advertising revenue: $8.92 billion vs. $8.89 billion expected
– Google Cloud revenue: $11.35 billion vs. $10.79 billion expected
Analyst Commentary
Bank of America analyst Justin Post stated in a report: "In 2024, Google's stock outperformed the S&P 500, benefiting from the launch of new AI products, stringent cost controls, improved cloud growth, and positive guidance revisions."
However, challenges remain, including disruptions from emerging Gen-AI search platforms and potential adverse rulings in the Department of Justice's antitrust case.
As the search business continues to dominate, 2025 will be a pivotal year, potentially cementing Google's position as an AI leader. Analysts forecast Google's search ad revenue to grow nearly 10% in 2025, reaching $216.5 billion.
According to the consensus forecast of analysts, the average target price of Alphabet is $215.95, which implies an 11.4% upside potential from the closing price of $193.77 on January 28, 2025.
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