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Alphabet Faces Key Earnings Report Amid Tariff Concerns and Antitrust Challenges

Alphabet (GOOG, GOOGL) is set to release its fiscal Q1 earnings after the bell on Thursday, marking the first major financial update since President Trump imposed tariffs on global trade partners.

While analysts don’t expect the tariffs to significantly impact Q1 revenue or earnings, attention will be on the company’s guidance for the second half of the year, especially as concerns grow about potential impacts on digital ad revenues. Barclays analyst Ross Sandler noted that e-commerce transaction volumes have slowed, and the uncertainty around macroeconomic factors might weaken digital ad spending in Q2.

Alphabet’s stock has dropped over 19% this year and about 3% over the past 12 months, reflecting the broader market concerns. However, tariffs are not the only worry. Wells Fargo Securities analyst Ken Gawrelski pointed out that ad agencies are rethinking their strategies due to the rise of generative AI tools and the growing influence of social media as sources of information.

For Q1, analysts expect Alphabet to report earnings per share of $2.01 on revenue of $89.1 billion, according to Bloomberg consensus estimates. Revenue, excluding traffic acquisition costs (TAC), is anticipated at $75.4 billion. In the same period last year, Alphabet posted EPS of $1.89 on $80.5 billion in revenue.

Google’s advertising revenue is projected to reach $66.4 billion, with YouTube ads contributing $8.9 billion. This marks a notable increase from the $61.1 billion in ad revenue reported in Q1 of 2024.

Investors will also focus on the growth of Google Cloud Platform (GCP) revenue, as the company continues to invest heavily in its AI data center expansion. Alphabet plans to spend $75 billion on AI infrastructure and data center capacity through 2025. Despite this, Google’s AI services are currently constrained by limited server capacity, which is preventing the company from fully capitalizing on potential customer demand.

Mizuho analyst James Lee highlighted that cost-cutting moves related to Elon Musk’s DOGE initiative and ongoing tariff impacts could hurt GCP sales, as some customers are pulling back on spending. GCP is expected to generate $12.3 billion in Q1 revenue, up from $9.5 billion in the same period last year.

Additionally, Alphabet is grappling with the aftermath of its recent antitrust losses. Last week, a US federal judge ruled that Google has an illegal monopoly in the online advertising space, which could lead to the company being forced to sell or restructure its ad business. This ruling comes less than a year after another antitrust decision found that Google’s search and ad practices violated competition laws.

Paraphrasing text from "Yahoo!Finance"all rights reserved by the original author