Earnings Preview | AlphabetQ1 Revenue Expected to Grow by 13%, Cloud Computing and AI Remain Focus

Zhitong Finance APP learned that Alphabet (GOOGL.US), the parent company of Google, will announce its financial performance for the first quarter of 2024 after the U.S. stock market closes on Thursday. Wall Street analysts predict that Alphabet's Q1 revenue will reach $78.79 billion, a 13% increase from the $69.79 billion in the same period last year; net profit is expected to reach $18.89 billion, a 26% increase from the $15.05 billion in the same period last year; and earnings per share are expected to be $1.51, compared to $1.17 in the same period last year.

Investors will closely monitor the continued growth of Alphabet's cloud business. After a period of slow growth, Google's cloud business saw significant growth in the fourth quarter of 2023—cloud revenue increased by 25.7% year-on-year to $9.2 billion, alleviating investors' concerns about the business stagnation.

CFRA analysts stated that following the 25% recovery in growth of Google's cloud business in the fourth quarter of last year, they believe "the cloud business will grow by at least 25% year-on-year in the first quarter," and they expect this growth rate to continue throughout 2024. However, analysts added that profit margins are also crucial, as Google has not actively cut costs like other large tech companies.

Bank of America analysts expect Google Cloud's first-quarter revenue to reach $9.34 billion. Analysts stated that the strong performance of this business and the quarter-on-quarter increase in profit margins may benefit Alphabet.

The progress of Alphabet in artificial intelligence (AI) is also one of the focal points for investors. As large tech companies strive to establish a presence in the AI trend, the latest information provided by Alphabet on its AI progress will be closely watched by investors.

Many large tech companies are developing their own AI chips, which can help them manage costs while reducing dependence on NVIDIA. Microsoft, Amazon, and Meta are all developing their own AI chips. Earlier this month, Alphabet introduced a new CPU designed for data centers, the "Google Axion," based on Arm architecture, in an effort to reduce the operating costs of cloud computing.

CFRA analysts stated that they see Alphabet gaining "incremental opportunities related to AI monetization through cloud computing, search, YouTube, and other businesses." Bank of America analysts also mentioned that AI is Alphabet's "tailwind," and "although the use of AI does bring long-term competitive risks to Google, by 2024, Google may see improvements in the monetization of AI."