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Why is Alphabet (GOOGL) up 3.7% since its last earnings report?

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A month has passed since the last earnings report for Alphabet (GOOGL). Stocks are up about 3.7% over the period compared to the S&P 500.

Will the recent positive trend continue until the next release of the figures, or is Alphabet ready for a downturn? Before we dive into how investors and analysts have reacted lately, let’s look at the most recent earnings report to get a better sense of key drivers.

Alphabet Earnings Miss Q3 Estimates

Alphabet’s Q3 2022 earnings of $1.06 per share fell 15.2% below Zacks’ consensus estimate. The figure was down 24.3% year-on-year.

Sales of $69.1 billion were up 6% year over year (11% in constant currency).

Net Revenue excluding total cost of acquiring traffic or TAC (TAC is the portion of revenue shared with Google’s partners and the amount paid to distribution partners and others who drive traffic to Google websites), $ 57.3 billion. That was behind the consensus figure of $58.4 billion. The figure rose 6.8% from the level of the same quarter a year ago.

TAC of $11.8 billion grew 2.8% year over year.

Revenue growth was driven by solid momentum in GOOGL’s cloud business. Strong performances from other hitters contributed well.

However, Alphabet saw sluggishness in YouTube ads and the Google network due to a slowdown in digital ads. This remained a major concern.

GOOGL plans to contain costs and delay hiring for fear of further economic slowdown.

Alphabet’s growing investment in AI, strong efforts to boost its search business, and expanding its cloud services portfolio, which are expected to generate huge returns in the coming days, remain key positives. This, in turn, is expected to increase investor optimism about the stock in the coming days.

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details section

Alphabet reports revenue under Google Services, Google Cloud and other bets.

Google services:

Google services revenue grew 2.5% year over year to $61.4 billion, accounting for 88.8% of total revenue.

Under this company, search revenue from Google-owned sites grew 4.3% year over year to $39.5 billion.

YouTube’s ad revenue fell 1.9% year over year to $7.1 billion, while network ad revenue fell 1.6% to $7.9 billion.

Google’s total advertising revenue grew 2.5% year over year to $54.5 billion and accounted for 78.9% of total revenue.

Google’s other revenue, including Google Play and YouTube non-ad revenue, was $6.9 billion for the third quarter, up 2.1% year-over-year.

Google Cloud:

Google Cloud revenue grew 37.6% year over year to $6.9 billion, accounting for 9.9% of quarterly revenue.

Other Bets:

Other Bets revenue was $209 million, up 14.8% year-over-year, accounting for 0.3% of total revenue in the third quarter.

regional specifics

EMEA (28.2% of total sales): GOOGL generated $19.45 billion in revenue from this industry, down 2% year-over-year.

APAC (16.6% of total sales): The region generated revenue of $11.5 billion, down 2% from the same quarter level a year ago.

Other Americas (6% of total sales): The region generated sales of $4.14 billion, up 12% year-over-year.

United States (48.3% of total sales): Alphabet generated $33.4 billion in revenue from this segment, up 12% from the level of the year-ago quarter.

operational details

Costs and operating expenses were $51.96 billion, up 17.6% year-over-year. As a percentage of sales, the figure was up 750 basis points (bps) from the level of the same quarter a year ago.

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Operating margin was 25%, down 700 basis points year over year. Segment-wise, Google Services’ operating margin of 32.2% contracted 780 basis points from last year’s level.

Google Cloud reported a loss of $699 million compared to a loss of $644 million in the same quarter last year.

Other Bets reported a loss of $1.6 billion, compared to a loss of $1.3 billion in the same quarter last year.

balance

As of September 30, 2022, cash and cash equivalents and marketable securities were $116.3 billion, down from $124.9 billion as of June 30, 2022.

Long-term debt at the end of the reported quarter was $14.6 billion compared to $14.7 billion at the end of the prior quarter.

Alphabet generated $23.3 billion in cash from operations in the third quarter of 2022, compared to $19.4 billion in the second quarter of 2022.

GOOGL spent $7.3 billion on capex, generating $16.1 billion in free cash flow in the reported quarter.

How have the estimates progressed since then?

As it turns out, the latest estimates have gone down over the past month.

These changes have shifted the consensus estimate by -15.27%.

vgm score

Currently, Alphabet has a decent growth rating of B, though it lags behind on the momentum score with an F. However, the stock was assigned C grade on the value side, which it was placed for in the mid-1920s. investment strategy.

Overall, the stock has an overall VGM score of B. If you’re not focusing on a strategy, this score should be what you should be interested in.

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Outlook

Estimates for the stock are broadly trending downwards, and the magnitude of these revisions points to a downward shift. It’s no surprise that Alphabet’s Zacks Rank #4 (Sales). We expect below-average returns from this stock in the coming months.

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Jax Investment Research

Source: finance.yahoo.com

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