Google earnings outlook: revenue and profits will continue to grow, but the growth rate will slow down

0
105

Tencent technology news on October 26, the revenue and profit of Google parent company alphabet have increased abnormally rapidly in recent quarters. However, while making these achievements, the company also faces major antitrust litigation, which may slow down the company’s growth. In the United States alone, alphabet faces four different antitrust lawsuits from states and regulators, involving issues related to the company’s market power in the fields of online advertising, search engine and Android mobile operating system.
Investors are waiting to see if alphabet can maintain its rapid growth rate of revenue and profit when it publishes the third quarter financial report of fiscal 2021. Analysts expect that alphabet’s revenue and earnings per share will continue to grow, but the growth rate will be lower than that of the previous quarter. Investors will also focus on the revenue of Google cloud, one of Google’s main business units. Google cloud supports developers through cloud platforms and other workplace collaboration tools. Analysts expect Google cloud revenue to grow at a strong rate, although it will also slow down from the previous quarter.
Alpha’s revenue and profit in the second quarter of fiscal year 2021 exceeded analysts’ expectations. Compared with the same period last year, earnings per share increased by 169.1%, the fastest growth rate since the second quarter of fiscal 2019. Revenue increased by 61.6% year-on-year, the fastest growth rate in any quarter of at least the past four years. Google said its strong revenue performance reflected the reality of increased consumer online activities and advertisers’ spending.
In the first quarter of fiscal year 2021, alphabet’s revenue and profit also exceeded analysts’ general expectations. Compared with the same period last year, earnings per share increased by 166.2%, faster than that in the last quarter of fiscal 2020. Revenue increased by 34.4% year-on-year, continuing the accelerated trend from the third quarter of fiscal 2020. The revenue growth is driven by the extensive growth of consumers’ online activities and advertising revenue.
Analysts expect that the revenue and profit of alphabet will continue to grow strongly in the third quarter of 2021, although the growth rate may be lower than that in recent quarters. Adjusted earnings per share was US $23.37, a month on month decrease of 14.3%, but a year-on-year increase of 42.5%, the lowest growth rate since the second quarter of fiscal 2020. The revenue is expected to be USD 63.32 billion, with a month on month increase of 2.3% and a year-on-year increase of 37%. Analysts predict that the annual earnings per share of alphabet in fiscal year 2021 will be US $101.07, with a year-on-year increase of 73.3%, which will be the fastest growth rate since fiscal year 2018. It is expected that the annual revenue will increase by 37.8%, which will be the fastest growth rate in at least the past five years.
In the third quarter earnings report, investors will also focus on the performance of Google cloud. Google cloud is one of the main business areas of alphabet. This department provides developers with a highly scalable and reliable platform for building, testing and deploying applications. It also provides workspace collaboration tools, including Gmail, docs, drive, calendar, meet and other applications. The company’s revenue is obtained by charging fees related to these services. By the end of the second quarter of 2021, Google cloud’s share in the global cloud market is estimated to be 8%, ranking third, second only to Microsoft azure and Amazon AWS.
Over the past five years, Google’s cloud revenue has grown rapidly, from $4.1 billion in fiscal 2017 to $13.1 billion in fiscal 2020. In the second quarter of last year, the growth rate of Google’s cloud revenue fell to the lowest quarterly level in at least the past three years. However, in the following two quarters, the sector accelerated its growth, with a year-on-year growth rate of 46.6% in the fourth quarter of fiscal 2020.
The year-on-year growth slowed to 45.7% in the first quarter of fiscal 2021, and then accelerated to 53.9% in the second quarter, the fastest growth rate since the third quarter of fiscal 2019. Analysts predict that the year-on-year growth rate of Google cloud revenue will slow to 47.9% in the third quarter of 2021. In fiscal year 2021, the revenue of cloud business will increase by 47.9%, slightly higher than that of last year.
Zacks equity research analyst said: “with the support of expanding cloud service portfolio and more and more data centers, the company has achieved significant development momentum in the highly competitive cloud market.” YouTube may continue to be a winner, and advertising sales are expected to rise by 47%.
In the past year, the share price of alphabet outperformed the market. The performance gap between the stock and other stocks in the market widened significantly from early February and continued until early September. Alpha’s share price has recently lost some of its gains. Alpha’s stock has provided a total return of 71.3% over the past year, much higher than 31.6% of the S & P 500 index. Since October last year, the share price of alphabet has risen by about 73.5%. However, in the past few weeks, the expected changes in European and US regulatory regulations have put great pressure on the stock, causing its share price to fall by more than 5%, including 3% on Friday.
However, analysts are still generally optimistic about the stock. Among the 46 analyst ratings, 44 gave the stock a “buy” or “strong buy” rating, and the other two gave the stock a “hold” rating. The current share price of alphabet is about $2751.3, and analysts generally expect the target share price to be $3200, which means that it still has 27% upward potential. At the high target price of $3600, the upward potential is close to 31%. (reviewed by Tencent technology / Jinlu)