Many investors are paying close attention to Alphabet Inc.’s (Google) ongoing antitrust litigation and growing competition in artificial intelligence as the company prepares to release its third-quarter results report on October 29.
The new Chief Financial Officer (CFO) of Alphabet, Anat Ashkenazi, who started on July 31, also makes his debut with this earnings release. Her opinions on important financial tactics including stock buybacks, cost-cutting, and the company’s operating margin trajectory will be closely watched by investors.
Price of Google Stock: Forecasts by Analysts
Additionally, analysts will demand greater financial openness from YouTube. Institutional ownership of Google shares (GOOGL) has declined in the run-up to the report.
Analysts predict that earnings per share (EPS) will rise by 19% to $1.84 in the third quarter compared to the prior year. Revenue is expected to rise to $86.4 billion, a 13% increase.
The cloud computing segment of Google is expected to develop rapidly, with revenues expected to increase by 29% to $10.87 billion. But according to other analysts, like Scott Devitt of Wedbush, Alphabet shares are still appealing because of their very cheap price-to-earnings ratio when compared to the overall market, even though Q3 earnings may not be a significant catalyst for the stock.
Pressures from the Law and Competition Affect Google’s Stock Performance
Google is facing obstacles from a government investigation in the midst of its antitrust issues. On October 7, a U.S. District Court decided that Google must guarantee equitable access for all apps and permit third-party app shops, like the Epic Games Store, on the Google Play platform. Although it is anticipated that Google will appeal the decision, this legal setback coincides with a larger Department of Justice (DoJ) antitrust action that may require adjustments to Google’s fundamental business operations. The possible loss of Google’s $20 billion search agreement with Apple, which sets Google as the default search engine on iPhones, is another major worry. A decision in this case might be rendered as early as August 2025, and it could have an effect on Google’s hegemony in the search market.
Notwithstanding these obstacles, Waymo, Google’s autonomous driving subsidiary, is still growing and just closed a $5.6 billion fundraising round.
With the introduction of a new large language model (LLM) and a notable increase in investor interest, OpenAI is becoming a more formidable rival in the AI market. Google has been aggressively incorporating its Gemini AI tools into its main products, such as internet search, in an effort to combat this. Additionally, the business has made its AI Overview function, which offers conversational summaries in addition to search results, available worldwide.
Google’s AI Investments and Financial Prospects
Investors are mostly interested in Google’s investments in cloud computing and artificial intelligence. Due to the company’s significant investments in AI infrastructure, Google’s capital spending increased by 91% to $13.18 billion in Q2. As CEO Sundar Pichai noted, “The risk of underinvesting is dramatically greater than the risk of overinvesting,” highlighting the importance of AI programs.
Even while Google’s Performance Max advertising platform has improved results for advertisers, the corporation is up against more and more competition in the AI-driven ad market, especially from rivals like Amazon and Microsoft.
Although it still ranks third in terms of cloud service providers, Google is behind Microsoft Azure and Amazon Web Services. Google’s cloud business is being keenly watched by analysts since it is anticipated to be a significant growth engine for the corporation, especially with the integration of cybersecurity company Mandiant, which Google purchased for $5.4 billion in 2022.
Is It Time to Buy Google Stock Before Q3 Earnings?
The S&P 500 has gained around 22% so far this year, while GOOGL stock has lagged in comparison to the overall market, despite a strong 58% increase in 2023. In July, the stock reached its highest point ever, $192, but it has since declined. The stock is undervalued, according to several analysts. Alphabet still has to deal with a number of serious lingering issues, such as antitrust lawsuits and the possible disruption of its core search business by generative AI.
While some analysts consider Google to be a long-term investment, the stock now has a Relative Strength Rating of 56, which is lower than the ideal score of 80 or more for leading growth firms, according to IBD Stock Checkup.
Additionally, weak institutional buying is suggested by the Accumulation/Distribution Rating of D. With a composite rating of 87 out of 99, Google may not be the best option for growth investors, despite the fact that the stock has potential.
To reassure investors, Google must handle its legal issues and AI competition dangers before releasing its Q3 earnings report. Analysts are still keeping an eye on Google’s expenditures in AI, the expansion of cloud computing, and the long-term effects of Waymo and YouTube Shorts on its earnings.
