Despite the Alphabet share price being in a downtrend since the start of 2022, Wall Street is forecasting bumper fourth quarter (Q4) results ahead of its announcement on 1 February.
Feb. 1, 2022
According to analysts polled by Zacks Equity Research, Alphabet’s revenue for the three-month period is expected to climb 27.8% year-over-year to $59.3bn. Earnings are forecast to come in at $26.69 per share, marking a 19.7% rise from the $22.30 per share posted in the same period a year ago. In the past two years, Alphabet has consistently beaten consensus earnings estimates.
While improvements to the group’s Google search engine business and the release of the Pixel 6 helped to make its previous quarterly results a success, investors will be keen to see how the company’s ad revenue performs compared to its cloud services in Q4.

Ad revenue: A key signal for the Alphabet share price
Alphabet makes most of its revenue from businesses that advertise products and services on Google, making it an important metric for the stock. Indeed, the Alphabet share price soared by 65.3% in 2021 as advertisers increased ad spend following a pullback in 2020 due to the pandemic.
Global ad spending, which was estimated by GroupM to have increased by 22.5% in 2021 to $763bn, has been a secular tailwind for the Google stock. In fact, marketers are rapidly turning to digital channels to advertise. The digital share of the total ad market increased to an estimated 64.4% in 2021, up from 52.1% in 2019, according to The Motley Fool.
Over the past five years, the Alphabet stock price has rallied 215.6% compared with the S&P 500’s return of 93.1%. However, since the beginning of 2022, the stock has fallen by 7.9% amid a broad market pullback.
Google still accounts for most of Alphabet’s revenue
In Q3, Alphabet beat consensus estimates both at the top and bottom level. Revenue came in at $65.1bn compared with the forecast of $63.3bn. The company also generated earnings for the three-month period of $27.99 per share, an increase from consensus estimates of $23.48 per share.
Google continues to be the main contributor to the group’s overall revenue. The search engine contributed approximately 60% of total sales during the previous quarter.
According to Zenith’s ‘Advertising Expenditure Forecasts’ report, the global ad market is expected to grow by 9.1% in 2022, 5.7% in 2023 and 7 4% in 2024. While Google has a strong share of the global ad market, Yiannis Zourmpanos, an investor and research analyst, notes that growing competition is starting to eat into it.
“Nevertheless, I don’t expect this to severely threaten the company’s competitive position in the long term, which is already factored in the stock price and justifies the lower valuation than its peers,” Zourmpanos wrote in Seeking Alpha.
YouTube and Google Cloud help to diversify
Alphabet’s wider businesses have continued to build scale. For example, YouTube, which was acquired by Google in 2006, accounted for 11.1% of Alphabet’s sales in Q3.
YouTube’s ad revenue increased to $7.2bn during the quarter, marking a 43% year-over-year rise from $5bn. The platform’s global user base reached approximately 2.2 billion in 2021 and Statista projects that to reach more than 2.9 billion users by 2025, increasing at a CAGR of 5%.
Despite strong competition from Amazon’s cloud product AWS, Google Cloud is also gaining traction. It was one of Alphabet’s fastest-growing segments in Q3, with revenue soaring by 45% year-over-year close to $5bn.
As the digital transformation accelerates and hybrid work remains a key trend, software services are seeing strong demand. During the earnings call, CEO Sundar Pichai (pictured) said that he expects to see that growth continue.
Innovation drives analyst ratings for the Alphabet share price
According to MarketScreener, analysts are bullish on the Google share price. The stock has a consensus ‘buy’ rating with an average price target of $3,367.11, representing a 26.2% increase from its closing price on 28 January.
Morgan Stanley equity analyst Brian Nowak was part of the bullish consensus, giving the stock an ‘overweight’ rating. The analyst cited “continued platform-level innovation on retail search and YouTube”, as well as “underappreciated products driven by mobile search and Maps” as key growth drivers, according to Yahoo Finance.
“AlphaWise data show how Alphabet’s innovation continues to drive more consumers to start their online shopping on Google, giving us more confidence in its multi-year ecommerce ad growth. This change is true even for Prime members, who seem to be starting less frequently on Amazon.com, a trend to monitor,” Nowak added.
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