Earnings Charts of the Big 5: Alphabet, Apple, Microsoft, Meta Platforms and Amazon

Google parent — Alphabet Inc. GOOGL — will deliver its third-quarter earnings results before the start of trading on Tuesday. However, is it the right time to buy the stock? After all, the Alphabet stock has declined from the highs it had set a few months ago. 

Fear not! Alphabet's AI prowess and diverse market strengths are anticipated to drive consistent profits and raise the share price. Let’s see – 

Alphabet’s Q3 Earnings are Expected to Boost the Share Price

Alphabet is set to report encouraging third-quarter 2024 earnings, which may increase the share price. For the reporting quarter, Alphabet’s earnings per share (EPS) is expected to be $1.83, more than $1.55, indicating a jump of 18.1%. 

Meanwhile, Alphabet has delivered a positive trailing four-quarter earnings surprise of 9.6%, on average, a tell-tale sign that the company has a reasonable chance to post earnings growth in the upcoming earnings release.

Revenues are projected to be $72.85 billion, a jump of 13.7% from year-ago sales of $64.05 billion. The AI boom will benefit Alphabet’s AI infrastructure and generative AI solutions in the third quarter, eventually boosting revenues vis-à-vis earnings.

Anyhow, management is always involved in the share buyback process, which reduces outstanding shares and improves EPS in the long run. As a result, Alphabet stock’s $7.65 Zacks Consensus Estimate for EPS is up 15.2% year over year.

Alphabet’s Cloud Division Continues to Exhibit Strength

Alphabet’s cloud division is facing stiff competition from Microsoft Corporation MSFT and Amazon.com, Inc. AMZN but it’s still growing at a solid pace and may help the stock price to scale northward. 

The rise in AI products that require a significant amount of spending on the cloud helped the segment’s revenues to climb 29% year over year to $10.3 billion in the last quarter. 

Worldwide acceptance of Alphabet’s Gemini and strength in large language models should help the Google Cloud division register $100 billion in annual revenues in the next five-year period, eventually helping profit margins to expand. 

Notably, the company’s net profit margin is 26.7%, slightly more than the Internet - Services industry’s 26.4%. Any reading above 20% indicates a high-profit margin and that the company has been able to manage expenses efficiently.

Alphabet Stock to Gain From Digital Ad Spending Increase

Strength in the digital advertising market is a boon for the Alphabet stock. This is because Alphabet is one of the leaders in digital advertising with all its products including Google Search and YouTube having over 2 billion monthly users.

Alphabet is relying on AI expertise to increase usage and improve user satisfaction in the digital advertising space, which is expected to see a 10% increase in spending annually through 2028, per eMarketer. 

Alphabet Has a Monopoly in Search Engine

When it comes to the search market, Alphabet has an undue advantage since its share is over 90%. Of course, ChatGPT has gained a lot of users in recent times but that’s not enough to derail Alphabet’s monopoly.

Alphabet, thus, can benefit from the economies of scale it enjoys in the search market and not have to worry about competition, a tailwind for the stock price. Alphabet’s overall revenues are time and again driven by the Google Search division.

Alphabet Stock to Benefit From Robotaxi Market Growth

Don’t forget Waymo LLC, Alphabet’s subsidiary, which could also be a reason for the stock price to scale upward. After all, the autonomous ride-hailing service is well-poised to gain from the expected increase of the robotaxi market by 67% annually through 2030, according to Straits Research. 

To introduce its ride-hailing service in Austin and Atlanta by next year, Waymo has partnered with Uber Technologies, Inc. UBER and analysts at Bank of America Corporation BAC expect Waymo’s revenues to climb to $75 million this year and even more in the years to come.

Alphabet Stock to Buy Hand Over Fist

While the growth in the AI industry is expected to be a blessing for Alphabet’s upcoming earnings, the inherent strength in the cloud, digital advertising, search, and robotaxi markets should help the company churn out profits consistently and boost the share price.

Prominent brokers estimate that the GOOGL stock’s average short-term price target is $201.78, an upside of 24% from the last closing price of $162.72. The highest short-term price target is $225, indicating an upside of 38.3%.

Additionally, the GOOGL stock is trading above the short-term 50-day moving average (DMA) and long-term 200-DMA, signifying a bullish trend, and the perfect time to buy the stock.

The GOOGL stock is also trading at 21.6X forward earnings, less than the industry’s forward earnings multiple of 23.0X. Therefore, buying the stock won’t burn a hole in your wallet.

The GOOGL stock, rightfully, has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Zacks Investment Research

US equity indexes rose Monday on bullish expectations for earnings from giant tech companies, and most government bond yields gained.

The S&P 500 advanced 0.4% to 5,832.1 after midday, the Nasdaq Composite rose 0.6% to 18,622.2, and the Dow Jones Industrial Average climbed 0.7% to 42,426.5. Among sectors, financials and utilities led the gainers with only energy easing.

Quarterly earnings from Apple , Microsoft , Alphabet , Amazon.com , and Meta Platforms are due this week, starting Tuesday. Last week, Tesla's results helped push the Nasdaq to a record high.

Investors are preparing for earnings from Wall Street's "Magnificent 7" and the final phase before the Nov. 5 presidential election.

Through Friday afternoon, more than 36% of S&P 500 companies reported Q3 results, and earnings increased 3.2% from a year earlier, trailing consensus estimates of more than 4%, and revenue increased 3.8%, D.A. Davidson said in a note. Still, earnings beats are running slightly above average with 81% of S&P 500 companies topping estimates, Bankim Chadha, chief US equity and global strategist at Deutsche Bank Securities, said in a note.

"Companies are beating by an aggregate 6.1%, on the back of a sizeable benefit from lower-than expected loan loss provisions by banks," Chadha said. "Excluding provisions, earnings are beating by 5.3%, slightly better than the historical average of 4.9%. Sales beats are near average, while margin beats stayed above average."

The 10-year US Treasury yield jumped 5.6 basis points to 4.29%, the highest since late July. The two-year rate advanced 5.5 basis points to 4.15%, close to the highest since early August.

In economic news, the Dallas Fed's monthly manufacturing index improved to minus 3.0 in October from minus 9.0 in September, compared with expectations for minus 9.2. The index still indicates contraction, in line with the Empire State, Richmond Fed, Kansas City, and the S&P Global flash indexes, while contrasting with the Philadelphia Fed reading that signaled expansion.

In company news, Boeing is launching concurrent public offerings of 90 million common shares at a par value of $5 a share and $5 billion of depositary shares, each representing a 1/20th interest in a share of newly issued Series A mandatory convertible preferred stock at a par value of $1 a share. Boeing shares fell 0.8%.

West Texas Intermediate crude oil tumbled 5.7% to $67.68 a barrel after Israel held back from retaliatory strikes on Iran's oil and nuclear facilities.

Gold fell less than 0.1% to $2,753.01 an ounce while silver climbed 0.4% to $33.93 an ounce.

Adobe ADBE shares have declined 6.1% in a month, underperforming the broader Zacks Computer & Technology sector’s return of 2.5% and the Zacks Computer Software industry’s appreciation of 0.2%.

ADBE suffers from a challenging macroeconomic environment, ongoing tensions between Russia and Ukraine that have negatively impacted the Digital Media segment and intensifying competition in the generative AI (Gen AI) space.

However, Adobe is benefiting from a strong demand for its creative products. Its Creative Cloud, Document Cloud and Adobe Experience Cloud products have been driving top-line growth.

ADBE’s strong positioning in the digital content and marketing industry, backed by its robust cloud-enabled products and growing GenAI capabilities, has been boosting its business prospects.

Rising subscription revenues and solid momentum across the mobile apps are major positives. Growth in emerging markets and robust online video creation demand remain tailwinds for Adobe.

For the fourth quarter of 2024, Adobe expects net new Annual Recurring Revenues in the Digital Media segment to be $550 million. Subscription revenues of Digital Experience are anticipated between $1.23 billion and $1.25 billion.

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