To The Moon

Alphabet ( $Alphabet(GOOG)$ ) is set to announce its fourth-quarter earnings on February 4, 2025. Analysts project earnings per share (EPS) of $2.13, reflecting a 30% year-over-year increase. Revenue is expected to rise 12% to $96.68 billion. The company has consistently exceeded analysts' earnings expectations for seven consecutive quarters. While the company's overall performance remains strong, several factors, including ongoing lawsuits and a dynamic regulatory landscape, add layers of complexity to the upcoming report. Analysts are keenly watching several key segments:

• Google Advertising: Expected to be a major driver with revenue estimates around $71.73 billion. Google Search & Other is forecasted to contribute approximately $53.29 billion, highlighting the enduring strength of Google's core business.

• Google Cloud: Anticipated to show a 35% year-over-year growth, with revenue estimates at $11.4 billion, reflecting the tech giant's expanding cloud services footprint.

• YouTube: The platform's ads and subscription services are projected to continue their upward trajectory, with combined revenue surpassing $50 billion over the last four quarters.

• Other Bets: Including ventures like Waymo, which are less about immediate revenue and more about future growth potential.

Investor and Analyst Sentiment:

Current sentiment among investors and analysts remains cautiously optimistic. Google stock has seen a 7.3% increase year-to-date, buoyed by its AI developments, strong advertising growth, and cloud expansion. However, the stock has shown volatility around key legal developments. Analysts from firms like Bank of America have noted Alphabet's outperformance against the S&P 500 in 2024, attributing it to new product launches and cost discipline, yet they remain watchful over the impact of ongoing antitrust lawsuits.

Impact of Ongoing Lawsuits:

With President Donald Trump's return to the White House, significant developments have emerged regarding the DOJ antitrust lawsuit against Google, initiated during the Biden administration. Google has criticized these proposals as extreme, expressing concerns over potential impacts on security and privacy. The court is scheduled to consider these measures in a hearing in April 2025.

The Trump administration is expected to modify the antitrust strategies implemented under President Biden. While the DOJ's case against Google is ongoing, experts predict a shift towards negotiation and settlement rather than aggressive litigation. This approach may involve relaxing certain antitrust policies, potentially halting efforts to dismantle Google's dominance in online search. In a move signalling continued scrutiny of Big Tech, President Trump has appointed Gail Slater as the head of the DOJ's antitrust division. Slater, known for her strong stance against Big Tech's market power, has been an economic adviser to Vice President JD Vance. Her appointment suggests that the administration may continue to pursue antitrust actions against major tech firms, including Google.

In Summary, The ongoing lawsuits are unlikely to significantly impact the company's earnings performance in the near term. However, the lawsuits may lead to increased regulatory scrutiny, potentially driving up costs and impacting future growth prospects. Market perceptions remain mixed, with some investors viewing the lawsuits as a potential headwind, while others see them as a manageable risk.

Challenges and Opportunities:

Challenges:

• Regulatory Uncertainty: Ongoing lawsuits and the potential for increased

  regulation remains a key concern. Investors will closely monitor the legal landscape for any developments, such as fines, penalties, or operational restrictions, which could disrupt Google's growth.

• Competitive Pressure in Cloud & AI: Despite Google's strong position, the company faces intense competition from Amazon and Microsoft in both cloud computing and AI, requiring it to innovate continuously to maintain its market share.

Opportunities:

• AI Advancements: Google’s investment in AI is a significant opportunity. With Google DeepMind and various AI initiatives, the company is well-positioned to benefit from the AI revolution, driving both its cloud services and advertising models.

• Ad Revenue Growth: As digital advertising continues to expand globally, Google is likely to capture more of the advertising spend, aided by its dominant position in search and video content via YouTube.

Post-Earnings Assessment:

Following the release, investors will scrutinize several areas:

• Management Commentary: The Q&A session during the earnings call will be crucial. Investors will be listening for any updates or commentary on the lawsuits, as well as management's outlook on the business.

• Segment Performance: A detailed look at the performance of each segment (Search, YouTube, Cloud, etc.) will reveal growth trends and potential areas of concern.

• Guidance: Google's forward-looking guidance will provide clues about the company's expectations for future performance, factoring in the various challenges and opportunities.

Conclusion:

In summary, while Google’s earnings report is expected to reflect strong performance across its core segments, ongoing legal challenges remain a significant overhang on the stock. If Google’s Q4 results demonstrate robust revenue growth in advertising, cloud, and AI, it could maintain positive momentum even amidst regulatory uncertainty. The Trump administration’s likely shift towards less aggressive antitrust action may also provide a buffer against immediate risks, but it is long-term risks related to potential penalties or restrictions that investors should watch.

Ultimately, Google’s stock performance will hinge on its business fundamentals and how effectively it navigates the ongoing legal landscape.

@TigerWire