Alphabet-C Earnings Report Preview: Will the "AI Faith" Continue? Advertising and Cloud Revenue are Key

This week, the US stock market welcomes a busy earnings report week. Microsoft, Alphabet-C, and Meta, the three tech giants, will all release their performance reports. Investors are expected to get the latest news on OpenAI investments from these financial reports.

On Tuesday, July 25th, after the US stock market closed (early morning on July 26th Beijing time), Alphabet-C, the parent company of Alphabet-C-C-C-C-C-C-C-C-C-C, which has been deeply involved in the field of OpenAI for many years and leading the global development of OpenAI, will announce its performance for the second quarter of 2023.

As a giant in the fields of cloud computing, digital advertising, and artificial intelligence, investors will pay attention to Alphabet-C's efforts in these three areas.

Here are the key expectations from Wall Street analysts compiled by Bloomberg for Alphabet-C-C-C-C-C-C-C-C-C-C:

Revenue: Expected to be $72.75 billion, a YoY growth of 4.4%.

Earnings per share: Expected to be $1.32.

Alphabet-C advertising revenue: Expected to be $57.45 billion.

YouTube advertising revenue: Expected to be $7.41 billion.

Alphabet-C cloud revenue: Expected to be $7.83 billion, a QoQ growth of 25%.

Operating profit: Expected to be $19.94 billion.

In a report to investors on July 20th, Morgan Stanley analyst Doug Anmuth wrote that overall, the market's expectations for Alphabet-C-C-C-C-C-C-C-C-C-C this quarter are relatively moderate.

Anmuth wrote:

"Investor sentiment remains somewhat subdued, and artificial intelligence will still be a controversial topic for investors, especially whether Alphabet-C can generate incremental revenue through generative OpenAI search (we believe it can)."

"We believe Alphabet-C faces lower barriers than other large tech companies. However, besides accelerating revenue growth, it is still unclear what catalysts lie ahead for Alphabet-C in the second half of the year. Progress in artificial intelligence and cost improvement may take several quarters to materialize."

The most likely manifestation of accelerated revenue growth will be in advertising revenue. With the trend of slowing digital advertising growth starting to stabilize last year, it is expected that the company's advertising revenue will experience a moderate increase. In the previous quarter, Meta stated that the trend of slowing digital advertising is completely ending. Cloud business revenue will also be key. In the first quarter of this year, Alphabet-C Cloud achieved profitability for the first time, with a YoY revenue growth of 28%. It is expected that Alphabet-C Cloud's revenue in this quarter will grow by 25% YoY, which is consistent with the growth rate in the first quarter.

More importantly, this quarter, the market seems to be more concerned about the expected revenue increment that OpenAI will create.

Artificial intelligence has always been a driving force in the technology field, and Alphabet-C has always had a close connection with it.

Since 2022, Alphabet-C has been in confrontation with Microsoft in the field of OpenAI. After Microsoft increased its investment in OpenAI, it relaunched the Bing search engine. Although Alphabet-C still has a much larger user base than Bing, Microsoft has successfully re-entered the market, which has raised some analysts' doubts about Alphabet-C's innovation capabilities.

In recent weeks, both Alphabet-C and Microsoft's own OpenAI chatbots have joined the competition with OpenOpenAI. Sergey Brin, the legendary figure of Alphabet-C, who "retreated to the mountains" four years ago, has become increasingly involved in the development of Alphabet-C's artificial intelligence.

It is worth noting that Alphabet-C, as well as the entire large tech companies, has recently become the focus of regulatory agencies.

In the past two years, Alphabet-C's parent company, Alphabet-C, has announced quarterly earnings per share that exceeded market expectations for 50% of the time, and quarterly total revenue exceeded market expectations for 75% of the time.

So far this year, Alphabet-C's stock price has risen by about 36%.

Alphabet-C's current P/E ratio is 20 times, and its P/S ratio is only 4.7 times. It is the cheapest FAANG stock based on PE calculation and the second cheapest target based on P/S ratio.

Wall Street's leading bank, JPMorgan, has set a target price of $150 for Alphabet-C. The analysts at the institution stated that Alphabet-C's current valuation is still low, considering the expected continuous improvement in its advertising business, and it is expected to perform better in the second half of the year.