What to Know Ahead of Alphabet’s Q4 2024 Earnings

The US stock market is extremely volatile right now due to President Donald Trump’s threats on tariffs. However, the earnings season for Big Tech firms is arguably more important for the short-term direction of the market.

With a slew of earnings due this week, Tuesday (4 February) after the market close will be big as search and advertising giant Alphabet Inc (NASDAQ: GOOGL) reports its latest Q4 2024 earnings.

The owner of the ubiquitous Google search engine, as well as a host of other ad behemoths like YouTube, will be closely watched as its Artificial Intelligence (AI) ambitions will also be under the microscope.

Here’s a quick breakdown of what investors should be watching from Alphabet ahead of its latest earnings release.

Expectations High Heading Into Earnings Print

Alphabet managed to post 15% year-on-year revenue growth in Q3 2024, notching up a whopping US$88.27 billion in sales and coming in ahead of expectations.

With strong numbers from Meta Platforms Inc (NASDAQ: META) last week, investors will be looking for similarly robust numbers from Alphabet.

Indeed, the market is expecting Alphabet to post Q4 2024 revenue of US$96.6 billion – up 12% year-on-year from the US$86.3 billion posted in the same period last year.

As for earnings per share (EPS), the market is looking for Alphabet to deliver US$2.13 in EPS versus the US$1.64 in the year-ago period.

Cloud and Capex to be a Focus

As with all of the cloud computing trio in the US, Google Cloud’s growth will be a core focus for investors. In Q3 2024, Google Cloud managed to a post a better-than-expected US$11.35 billion in revenue that translated into an enviable 35% year-on-year growth rate.

For Q4 2024, investors are hoping that Google Cloud can bring in US$12.1 billion in revenue, up from the US$9.1 billion that the unit saw for Q4 2023 – meaning a year-on-year growth rate of around 33%. 

That would compare favourably to Microsoft Corporation (NASDAQ: MSFT) and its Azure service, which notched up 31% year-on-year growth when the tech giant reported last week. Any upside surprise from Google Cloud’s top line in Q4 2024 could certainly be a positive catalyst for Alphabet shares.

Of course, capital expenditure (capex) will be one of the accompanying talking points given the massive infrastructure buildouts by the cloud giants. In Q3 2024, Alphabet spent US$13.06 billion on capex – ahead of expectations. 

Given management comments on the Q3 2024 call that capex spend in 2025 will be higher than in 2024, the market will be looking for any clues from Q4 2024 numbers and management guidance on how big the 2025 capex figure could be.

YouTube, Ads, and AI

One of the consistent performers for Alphabet in recent years has been YouTube and its gradually higher share of viewing hours in US households. Investors are optimistic that the long-form video platform can continue to deliver strong results following Q3 2024 revenue of US$8.92 billion that came in slightly ahead of expectations.

With the US presidential election in November 2024 and a strong US consumer still buoying the economy, ad spending is likely to have been robust – which should bode well for Alphabet during the period. Whether the company sees this continuing is another matter though.

Finally, for investors, AI will of course be something closely watched. Commentary from Q3 2024’s earnings call saw optimism around how Alphabet’s AI model – Gemini – was helping to cut operating costs across the company.

Whether the firm can find more use cases for its model and more importantly, opportunities to monetise it more effectively, will be questions investors want answers to. 

However, judging by Alphabet’s Q3 2024 post-earnings share price pop in November, any good news on AI and Google Cloud growth should mean a positive share price reaction in after-hours on Tuesday.