What to look for when Alphabet (GOOGL) reports Q4 earnings on Feb 3

Alphabet Inc. (NASDAQ: GOOGL) is slated to report its fourth-quarter 2019 earnings results on Monday, February 3, after the market closes. The top line will be benefited by the ongoing strength in mobile search, YouTube and cloud while higher costs, content acquisition costs, hardware costs and an increase in income tax provision could drag the bottom line lower.

The Google Cloud Project is expected to be the primary driver of Cloud performance backed by possible strong customer demand for compute and data analytics products. This is complemented by ongoing growth in G Suite reflecting both new pricing and seat growth.

The bottom line is likely to be impacted by the costs related to the investments in the segments. The company expects continued foreign exchange headwinds again in the fourth quarter. The foreign exchange headwinds will impact both revenues and operating income as the majority of its expenses are in the US.

Over the long term, the company remains focused on continuing to enhance the experience for users and advertisers driven by the performance of its advertising business. The seasonality of the hardware business is expected to be moderated somewhat with the introduction of the Pixel 3a in the second quarter and Pixel 4 hitting the stores mid-October 2019.

The company is expected to support the ongoing demand for machine learning across its business as well as for Cloud, Search, and YouTube as this remained the primary driver of Capex investment.

Read: Lam Research Q2 earnings snapshot

Analysts expect the company’s earnings to decline by 1.70% to $12.55 per share while revenue will jump by 19.50% to $46.93 billion for the fourth quarter. The company has surprised investors by beating analysts’ expectations twice in the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $1,536.07.

For the third quarter, Alphabet posted a 23% drop in earnings due to higher costs and expenses as well as higher income tax provision. Revenue from the Google segment grew by 20% while advertising revenue increased by 17%. Other revenue, which includes revenue from cloud and play store, jumped by 39% and that from the Other Bets division, which includes Waymo and Verily, rose 6%.

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