Alphabet's Q4 Earnings Preview: AI Innovations and Legal Challenges in Focus

Here's what analysts are watching for in Google parent Alphabet's earnings

Google-parent Alphabet is among a host of earnings reports from some of the largest companies in the world this week that are top of mind for investors. Alphabet's fourth-quarter results are due Tuesday after the stock market closes. The owner of YouTube and Fitbit is navigating questions surrounding its competitive standing in the artificial intelligence race, particularly tied to its search engine growth, infrastructure investments, and ongoing product innovation in AI models, self-driving technology and quantum computing. Analysts polled by LSEG expect Alphabet to earn $2.13 per share on $96.56 billion in revenue. Last quarter, the company exceeded estimates on the top and bottom lines , driven by strong revenue growth from its cloud unit. Alphabet's stock is up about 8% this year, with the majority of analysts generally bullish on its advancements and opportunities in AI and hopeful that a new chief financial officer could improve its cost structure. Sentiment remains positive on Alphabet's valuation, too, as analysts polled by FactSet have a consensus buy rating and $217 target price, suggesting about 8% potential upside from Monday's close. GOOGL 1Y mountain Alphabet stock over the past year. Shares advanced as much as 2.7% intraday on Tuesday ahead of the earnings report, reaching an all-time high. Analysts from several firms -- including JPMorgan, Citi and Bank of America -- reiterated their bullish ratings and price targets on Alphabet. Many expect Google to benefit from strong advertising spending growth, and believe it's in safe hands as Meta's recent results suggested that generative AI is driving ad price growth. Meta's earnings "should also benefit GOOG, cementing it as an AI winner," Oppenheimer analyst Jason Helfstein said in a note to clients last week. "If investors begin to struggle with META's revenue outlook or [mid single digit] 2025 EPS growth, GOOG could become [a] more attractive alternative." Helfstein kept his outperform rating but raised his price target by $10 to $225, citing confidence that users engagement with Google's search engine remains strong and that ad spending should benefit from robust consumer spending. Bank of America and JPMorgan are similarly optimistic on continued search growth, aided by strength in e-commerce and ad spending, the success of AI overviews (AIOs) in Google Search and AI targeting in Youtube driving greater user engagement. "We remain constructive on Alphabet and believe [the] Street is likely underestimating potential for AIOs to drive Search monetization strength in 2025 ... We see Alphabet as well positioned long term with leading AI technology to apply to search, YouTube and Cloud businesses," Bank of American analyst Justin Post said in a report to clients last Friday. Post maintained his $225 price target, implying about 12% upside over the next 12 months from Monday's close. JPMorgan analyst Doug Anmuth is also bullish on Alphabet's array of AI products, including large language models, infrastructure and chips, agentic AI applications with NotebookLM, Astra and Mariner among others, which he believes could drive upside across the company as well as in Google Cloud. He recently maintained an overweight investment opinion and year-end price target of $232. "Google's accelerated pace of innovation is very evident into the new year with many significant recent product announcements and updates across GenAI (new LLMs and agentic applications), technical infrastructure, Android, and Waymo, and it is a key factor in our positive view on Google shares in 2025," Anmuth said in a report. To be sure, other analysts are unconvinced that Alphabet has a smooth road ahead. Citizens JMP recently downgraded the stock to market perform from market outperform, citing risks tied to the Justice Department's antitrust case against Google that the bank believes could hurt Google's search business in the U.S., and its revenue. "With a final ruling expected by August 2025, we expect this case to be a primary focus for investors in the year ahead, limiting multiple expansion," Citizens JMP analyst Andrew Boone wrote in a report last month, adding that shares appeared "fairly valued" after returning 37% in 2024.

Alphabet Q4 Earnings Preview: AI, YouTube, DOJ Case Key Items To Watch As Company Goes For Eight Consecutive Revenue/EPS Beat - Alphabet (NASDAQ:GOOGL)

The company has a pending case with the Department of Justice, which could become a key topic. Technology giant Alphabet Inc GOOGGOOGL could focus on cloud, AI and YouTube growth when the company reports fourth-quarter financial results after market close Tuesday. Earnings Estimates: Analysts expect the company to report fourth-quarter revenue of $96.6 billion, up from $86.3 billion in last year's fourth quarter, according to data from Benzinga Pro. The company has beaten analyst estimates for revenue in seven straight quarters. Analysts expect the company to report fourth-quarter earnings per share of $2.13, up from $1.64 in last year's fourth quarter. The company has beaten analyst estimates for earnings per share in seven straight quarters. Read Also: Alphabet Q4 Earnings Preview: Bullish Trend Just Getting Started? What Analysts Are Saying: Recent strength in advertising for Meta Platforms could foreshadow strong advertising strength for Alphabet, Bank of America analyst Justin Post recently said. The analyst, who has a Buy rating and $225 price target, said Alphabet should show positive commentary on cloud demand in the fourth-quarter results and commentary. Post said Alphabet will likely show strength in search thanks to AI usage helping with monetization and YouTube could also benefit from improved AI targeting. Potential negatives for Alphabet would be talking about tougher first-quarter advertising comps, slowing YouTube growth or new hiring/Capex commentary. "We remain constructive on Alphabet and believe Street is likely underestimating potential for AIOs to drive Search monetization strength in 2025," Post said. Here are other analyst ratings for Alphabet and their price targets: JMP Securities: Reiterated Market Perform rating, no price target Needham: Maintained Buy rating, increased price target from $210 to $225 DA Davidson: Maintained Neutral rating, increased price target from $190 to $200 Cantor Fitzgerald: Maintained Neutral rating, lowered price target from $215 to $210 Key Items to Watch: Alphabet likely won't comment on pending legislation, but could be asked about its current case with the Department of Justice and what the new White House administration means. Alphabet donated $1 million to Donald Trump's inauguration fund, an amount higher than the $285,000 donated to the 2016 and 2020 inaugurations. The company also live-streamed the inauguration on YouTube. The donation comes as the company has been targeted by the Department of Justice for alleged monopolistic behavior and could be forced to break up and spin off assets such as the Chrome browser. While there's no certainty that a donation or a visit to Mar-a-Lago will sway the new administration or prevent such outcomes, changes to the DOJ's leadership could potentially shift the company's legal challenges. Incoming Vice President J.D. Vance also previously said he wants to break up Alphabet, which could make the company a target of the new administration. Senator Ted Cruz (R-Texas) recently told Politico that Republicans would target Alphabet's Google and YouTube content moderation policies on the search engine. As mentioned by Post, AI could also be one of the key themes. "Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools," Alphabet CEO Sundar Pichai said after third-quarter results. Pichai said at the time that Alphabet was winning larger deals and attracting new customers thanks to its AI solutions in the cloud. Investors and analysts would welcome an update on this and what the future holds for its cloud segment thanks to AI tools. YouTube passed $50 billion in total ads and subscription revenues over the last four quarters for the first time, he said. GOOGL Price Action: Alphabet stock closed Monday down 1.37% to $201.23 versus a 52-week trading range of $130.67 to $205.48. Alphabet stock is up 40% over the last year. Read Next: EXCLUSIVE: This 'Magnificent 7' Stock Will Feel The Pinch Of Fed's Rate Decision, Poll Shows Photo: Shutterstock GOOGLAlphabet Inc$203.19-0.40%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$204.69-0.44%Market News and Data brought to you by Benzinga APIs

Alphabet Q4 Earnings Preview: AI, YouTube, DOJ Case Key Items To Watch As Company Goes For 8 Consecutive Revenue, EPS Beats - Alphabet (NASDAQ:GOOGL)

The company has a pending case with the Department of Justice, which could become a key topic. Technology giant Alphabet Inc GOOGGOOGL could focus on cloud, AI and YouTube growth when the company reports fourth-quarter financial results after the market close Tuesday. Earnings Estimates: Analysts expect the company to report fourth-quarter revenue of $96.6 billion, up from $86.3 billion in last year's fourth quarter, according to data from Benzinga Pro. The company has beaten analyst estimates for revenue in seven straight quarters. Analysts expect the company to report fourth-quarter earnings per share of $2.13, up from $1.64 in last year's fourth quarter. The company has beaten analyst estimates for earnings per share in seven straight quarters. Read Also: Alphabet Q4 Earnings Preview: Bullish Trend Just Getting Started? What Analysts Are Saying: Recent strength in advertising for Meta Platforms could foreshadow strong advertising strength for Alphabet, Bank of America analyst Justin Post recently said. The analyst, who has a Buy rating and $225 price target, said Alphabet should show positive commentary on cloud demand in the fourth-quarter results and commentary. Post said Alphabet will likely show strength in search thanks to AI usage helping with monetization and YouTube could also benefit from improved AI targeting. Potential negatives for Alphabet would be talking about tougher first-quarter advertising comps, slowing YouTube growth or new hiring/Capex commentary. "We remain constructive on Alphabet and believe Street is likely underestimating potential for AIOs to drive Search monetization strength in 2025," Post said. Here are other analyst ratings for Alphabet and their price targets: JMP Securities: Reiterated Market Perform rating, no price target Needham: Maintained Buy rating, increased price target from $210 to $225 DA Davidson: Maintained Neutral rating, increased price target from $190 to $200 Cantor Fitzgerald: Maintained Neutral rating, lowered price target from $215 to $210 Key Items to Watch: Alphabet likely won't comment on pending legislation, but could be asked about its current case with the Department of Justice and what the new White House administration means. Alphabet donated $1 million to Donald Trump's inauguration fund, an amount higher than the $285,000 donated to the 2016 and 2020 inaugurations. The company also live-streamed the inauguration on YouTube. The donation comes as the company has been targeted by the Department of Justice for alleged monopolistic behavior and could be forced to break up and spin off assets such as the Chrome browser. While there's no certainty that a donation or a visit to Mar-a-Lago will sway the new administration or prevent such outcomes, changes to the DOJ's leadership could potentially shift the company's legal challenges. Incoming Vice President J.D. Vance also previously said he wants to break up Alphabet, which could make the company a target of the new administration. Senator Ted Cruz (R-Texas) recently told Politico that Republicans would target Alphabet's Google and YouTube content moderation policies on the search engine. As mentioned by Post, AI could also be one of the key themes. "Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools," Alphabet CEO Sundar Pichai said after third-quarter results. Pichai said at the time that Alphabet was winning larger deals and attracting new customers thanks to its AI solutions in the cloud. Investors and analysts would welcome an update on this and what the future holds for its cloud segment thanks to AI tools. YouTube passed $50 billion in total ads and subscription revenues over the last four quarters for the first time, he said. GOOGL Price Action: Alphabet stock closed Monday down 1.37% to $201.23 versus a 52-week trading range of $130.67 to $205.48. Alphabet stock is up 40% over the last year. Read Next: EXCLUSIVE: This 'Magnificent 7' Stock Will Feel The Pinch Of Fed's Rate Decision, Poll Shows Photo: Shutterstock GOOGLAlphabet Inc$203.42-0.29%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$204.80-0.39%Market News and Data brought to you by Benzinga APIs