Financial Associated Press, April 26 (Editor Shi Zhengcheng) On Wednesday morning Beijing time, Internet giant Alphabet will disclose a quarterly report. Among the six traditional FANMG giants, in addition to Netflix and Meta, which have previously exploded, Google's parent company Alphabet is also the company whose business model is most vulnerable to the post-epidemic era among the remaining four trillion giants.
As of Monday's close, Alphabet A shares have fallen 15.03% year-to-date. Considering the 17% decline in the NASDAQ 100 index year-to-date, if anything goes wrong tomorrow morning, the NASDAQ 100 is likely to be kicked back into bearish territory again.
(Alphabet A daily chart, source: TradingView)
Revenue growth is expected to slow down The question is how much it can be slowed down
Although when it comes to "home concept stocks", the most intuitive impression of the market may be Netflix, Paleton, Microsoft, and even Coca-Cola, Alphabet is indeed one of the biggest beneficiaries of the growth boom during the epidemic. The logic is also simple, as consumers have to shift a lot of shopping demand online, advertisers' budgets will also rise.
After the impact of the outbreak of the epidemic in the first two quarters of 2020, Alphabet's revenue continued to grow explosively in the following year and a half, with total revenue of more than $250 billion in fiscal 2021, while the lowest year-on-year growth rate in four quarters was more than 30%.
But there will always be a day when the outlet will stop, and Alphabet is no exception. At present, the consensus expectation of the market is that the company achieved revenue of $68.2 billion in the first quarter of this year, an increase of 23.3% year-on-year, continuing the decline in growth that began in the third quarter of last year. More importantly, the market expects Alphabet's net profit per share in the first quarter of 25.65, which will also be the first year-on-year decline since the second quarter of 2020, and the EPS in the first quarter of last year was $26.29.
(Source: Company Financial Report, Financial Associated Press)
There are still different views on the impact of digital advertising headwinds impacting Alphabet. On the one hand, according to the data of last year's four quarters report, google search engine and Youtube represented a advertising business revenue of 61.2 billion US dollars, accounting for 80% of the overall revenue, and also shouldered the responsibility of making up for the losses of other businesses. The impact of this part of revenue will inevitably drag down performance. But conversely, Google's search business is also stronger than that of streaming media platforms, and in theory, it should be more resilient.
For the more distant full-year guidance, analysts are now expecting revenue to rise 17.7% year-over-year, but EPS for the full year is only slightly higher by 3.5%, at least the lowest in the past five years. So the market is a little bit expected for Alphabet to give not-so-beautiful performance guidance tomorrow.
Keep an eye on Google Cloud growth
Alphabet's bright spot business in recent years, Google Cloud Services revenue has also doubled from $5.8 billion to $19.2 billion in the past four years. As of the end of the fourth quarter of last year, Google Cloud's global cloud services market share also reached 9%, ranking third in the world after Microsoft Azure and Amazon AWS.
Shouldering the hope of Alphabet's continued growth, this is why the proportion of cloud service revenue is not high and continues to lose money, but it is still an important indicator of the earnings season.
But similar to Google's advertising business, Google Cloud is also facing pressure from a continuous decline in growth.
Following the decline in revenue growth to 44% in the last two quarters of last year, the current market expects Google Cloud Q1 growth to further decline to 41.9%, which will also be the lowest value in the past 14 quarters, while analysts expect 38.4% of revenue growth for the whole year, which also means that analysts are worried that the business will be difficult to reverse the slowdown in growth.