Alphabet Q1 2024 earnings preview: generative AI's role in shaping future growth

When will Alphabet report its latest earnings?

Alphabet Inc is scheduled to report its first quarter (Q1) 2024 earnings after the market closes on Friday, 26 April 2024 at 6.00am AEST.

The role of Generative AI in Alphabet

Analysts are projecting revenues of $69.787 billion and earnings per share (EPS) of $1.89. While the company's services segment is expected to deliver a flat performance, Alphabet's cloud computing division is experiencing significant growth, highlighting the company's efforts to diversify its revenue streams.

The market is particularly interested in Alphabet's strategy and progress in integrating generative Artificial Intelligence (AI) into its search and advertising services, as this could be a key driver of future growth. Despite the short-term correction in Alphabet's stock price, the company's Class C shares maintain an average 12-month price target of $168.64 among analysts, and the stock remains in a long-term uptrend, suggesting investor confidence in the company's prospects.

What ‘the Street’ expects from Alphabet's Q1 results?

A Refinitiv poll of analyst estimates (as of 18 April 2024) arrives at the following conclusions:

• Revenue for the quarter is expected to be US$69.787 billion
• Earnings per share for the quarter are predicted to be US$1.89

Google’s services segment remains the largest contributor to revenue, with US$61.961 billion expected, and is anticipated to remain roughly flat year-on-year. Google’s cloud segment is forecast to be the growth driver for the group, adding around 28% year-on-year revenue growth, reaching a figure of US$7.546 billion.

The group's ‘Other Bets’ division is expected to see a 35% contraction in its revenue contribution to the group at around US$288 million.

Markets will be looking for further news around the company’s involvement and integration of generative Artificial Intelligence (AI) into search and ads services. Capital expenditure will also likely be a key focus, relative to investment into cloud and AI, particularly in light of recent cost-cutting initiatives.

How to trade Alphabet results

Based on 11 Wall Street analysts offering 12-month price targets for Alphabet Class C in the last three months, the average price target is US$168.64, with a high forecast of US$185.00 and a low forecast of US$160.00. The average price target represents a 7.50% change from the last price of US$156.87. 89% of IG client accounts with open positions on Alphabet, as of 18 April 2024, expect the price to rise in the near term, while 11% expect the price to fall.

Wall Street analysts see further gains ahead

IG Client sentiment chart

Alphabet (Class C) technical analysis

The share price of Alphabet remains in a long-term uptrend. In the near term, we are observing a correction of this uptrend from recent highs and overbought territory.

Trend followers might wait for this period of weakness to play out before looking for a long entry in line with the longer-term uptrend. Confirmation that the short-term correction has concluded, and that the longer-term uptrend is resuming, might be identified by a bullish price reversal closer to either the US$149.90 or US$142.30 support levels. In this scenario, channel resistance provides a longer-term upside target of around US$166.40.

Alphabet daily chart