Alphabet (GOOGL) earnings Q3 2021

Google CEO Sundar Pichai speaks during a Google I/O keynote session at the Shoreline Amphitheater in Mountain View, California on May 7, 2019.

Josh Adelson | AFP | Getty Images

Alphabet will report third-quarter earnings after the bell.

Here’s what Wall Street expects:

  • Earnings per share (EPS): $23.48 per share, according to Refinitiv estimates.
  • Revenues: $63.34 billion, according to Refinitiv estimates.
  • YouTube advertising revenue: $7.4 billion, according to StreetAccount estimates.
  • Google Cloud revenue: $5.07 billion according to StreetAccount estimates.
  • Traffic Acquisition Costs (TAC): $11.16 billion, according to Street Account estimates.

Google’s core advertising business has enjoyed record revenue growth in recent quarters as economies reopen after the pandemic, but analysts are focusing on how supply shortages and privacy changes Apple is implementing will affect spending.

Earlier this year, Apple added prompts in iOS 14 that allow users to move away from targeting ads on apps. Both Snap and Facebook cited these changes as the biggest cause of business turmoil in the last quarter.

While Google is better protected from those companies because it owns the Android operating system, it still relies on Apple to distribute its apps on iPhones.

Both Google and Apple are facing increased scrutiny from regulators, although their shares have not been hurt. In August, lawmakers introduced a bipartisan bill seeking to increase competition in the app store market. By law, Google and Apple will not be allowed to correlate the distribution of an app on their own app store with whether a developer is using their own payment system.

Google recently said it will halve its App Store fee service fee from 30% to 15%. In July, the state’s attorney general announced an antitrust lawsuit against Google, alleging that the company abused its power over app developers through the Android Play Store.

Focus on costs

Investors pay close attention to the costs of acquiring traffic, or the money that Google shares with partner sites. During the quarter, Google introduced a search redesign that answers detailed queries, an tweak that could keep users on its site longer and reduce spending.

As Alphabet tries to diversify its revenue sources, the company has invested heavily in its cloud division, which competes with Amazon Web Services and Microsoft Azure. The division, led by former Oracle CEO Thomas Kurian, has shaken up its internal organization as it attempts to increase revenue and narrow its losses.

Alphabet is still losing money from self-driving car company Waymo, which falls into the category of other bets in its earnings report. Waymo announced this quarter that it would begin testing the vehicle with San Francisco residents, showing progress toward opening the ride-hailing service in a second market.

Alphabet’s earnings could get a boost from the start-up investments that the company’s own project groups have made in recent years. In September, growth-stage investment group CapitalG generated huge returns after going public with software company Freshworks. Also that month, Google’s early-stage investment group, GV, took home a win from a smaller investment in Toast, which held its IPO.

With plans to bring employees back to its offices in January, Google said in September it was buying another New York City office building for $2.1 billion. The company is also planning another campus in Silicon Valley, which will be located next to a new hub partially dedicated to hardware.

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