Alphabet share price: what to expect in Q4 earnings

Alphabet has had a rapid ascent to the $1 trillion club. Driving this - and Alphabet's [GOOG] share price - has been their dominance in pay-per-click advertising. But Q3 disappointed, with earnings results missing Wall Street expectations.

Since then Sundar Pichai became chief executive, taking over from Google founder Larry Page in December. Pichai takes the helm at a tricky time for Alphabet. The tech giant is undergoing a Federal antitrust investigation  - a problem it shares with Facebook and Microsoft; last month also saw Google’s Chief Legal Officer David Drummond exit the company after 18 years. The reason? Mounting lawsuits over workplace conduct.

Despite this Alphabet's share price has had a strong start to 2020. Since the start of January, it has risen 4.7%, outpacing the S&P 500's -0.99% decline. It seems that with no real rivals in search, investors are backing Alphabet’s long-term dominance. So will a solid Q4 earnings result boost Alphabet’s share price, and with it solidify the firm’s position in the $1 trillion club?

When does Alphabet report Q4 earnings results?

3 February

What to look out for in Alphabet's Q4 earnings

Google and Youtube ad revenue

Both Google search and YouTube enjoy near-global domination. The services are the bulk of Alphabet's revenue through ad revenue. YouTube has the added bonus of premium services for extra revenue. Last quarter, these services brought in a combined $28.6 billion, up 19% on the previous year.

Alphabet is notorious for not releasing information on YouTube revenues. Yet, Marketwatch highlights eMarketer data saying net ad revenue will come in at $11.38 billion in 2019, up almost 20%. YouTube will have 1.76 billion viewers worldwide this year - a colossal two-thirds of digital streaming viewers. Expect revenues here to dominate earnings again.

Google Cloud grows

While Google Cloud represents a fraction of Alphabet's revenue, it's becoming more important. Last year, Mayo Clinic and Macy's - among others - shifted their data to Google Cloud. This year, new data centres will be opening in Nevada and Poland as Google Cloud expands domestically and internationally.

According to media reports, Alphabet has a 2023 deadline to become the second biggest player in cloud computing. It’s an ambitious target. But one that could pay off. With an annual revenue run rate of more than $8 billion, it's definitely adding to the top line numbers.

What do analysts expect in Alphabet's Q4 earnings?

Analysts expect Alphabet to post $12.6 earnings per share, down from the $12.77 seen in the same quarter last year. Revenue is forecast at $46.92 billion, up 19.5%.

Last quarter, Alphabet thumped analyst expectations. Earnings per share came in at $12.77, well above the $10.92 Wall Street was expecting. But an earnings beat isn't a given. In Q2, Alphabet missed analyst earnings expectations by a hefty 10.6%.

These past few months have seen analysts raise their ratings on Alphabet's share price. In December, Stifel raised its rating from Hold to Buy, while Pivatol Research did the same thing in January. Bernstein initiated its coverage of Alphabet stock with a Buy rating.

Among the analysts, Alphabet has a $1549.13 share price target. Hitting this would represent an 8.1% upside on the current share price.