Alphabet’s Q3 Earnings: Navigating Legal Battles and Market Changes
Alphabet’s Q3 Earnings: Navigating Legal Battles and Market Changes
The company formerly called Google faces legal challenges and concern over ad revenue
- Alphabet is set to report quarterly earnings on Tuesday, Oct. 29.
- Analysts expect the company to report earnings per share (EPS) of $1.84 vs. $1.46 in Q3’23.
- Advertising revenue is in focus for investors, as competitors and legal challenges add resistance.
Alphabet (GOOGL) is scheduled to report third-quarter fiscal earnings on Tuesday, October 29, after the market close.
GOOGL was tracking for a nearly 2% monthly decline as of today, but the stock price remained up over 10% from its August low, which marked the lowest trading level since March. In July, Google dropped after investors showed concern about spending on artificial intelligence.
The search-engine company has faced headwinds over the last several months, including the emergence of ChatGPT, as well as a proposed set of sanctions from the U.S. Department of Justice.
The advent of artificial intelligence quickly grabbed the public’s attention, especially as OpenAI’s ChatGPT was made available to the public in late 2022. According to a survey from Evercore, those using Google as their main search engine dropped to 74%, down from 80% in its last survey.
However, Google’s searches for travel and shopping remained largely untouched. That’s important because those segments drive a large portion of Google’s ad revenue—which is how it makes the bulk of its money. For now, the warning bells are ringing but there isn’t immediate cause for concern.
Meanwhile, Alphabet faces fallout from an antitrust lawsuit from the DOJ—one that could potentially threaten the company’s near-monopoly over web-based searches. The DOJ has made several proposals following a ruling in August that found Alphabet acted unlawfully to keep its monopoly, including putting an end to deals it makes with large companies like Apple (AAPL). Google has until December to offer its own remedies.
What do analysts expect from Alphabet’s earnings?
Analysts expect Alphabet’s earnings per share (EPS) to cross the wires at $1.84 on $86.37 billion in revenue. That would be up from $1.55 reported in Q3’23 and up from $76.69, representing an 18.71% and 12.62% increase, respectively.
A contentious election season should help to propel Google’s bottom line because advertising dollars are strong going into the November balloting. A still-resilient U.S. economy may also help provide a tailwind for ad spending into the holiday season.
Trading GOOGL on earnings
GOOGL, as of today (Oct. 24), trades with an implied volatility rank (IVR) of 57.6, meaning volatility is elevated slightly compared to the past 12 months. The expected move based on the Nov. 1 options expiration calls for a move of +/- 9.31 points, or 5.7% of the current stock price.
That said, while volatility isn’t exceptionally elevated, trading an iron condor would provide a directionally neutral trade. Setting the short strikes on the margins of the expected move, at 152.5 and 172.5, and setting the longs at 150 and 175, would give a trade with a probability of profit (POP) of 60%, with a max profit of $98 and a max loss of $152.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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