Nasdaq 100 forecast: How will Alphabet earnings impact GOOGL stock?

Key takeaways

• Revenue and earnings growth both accelerating
• Alphabet’s dominance in search has allowed it to outperform ad rivals like Meta
• Google Cloud has turned profitable and benefiting from AI tailwinds
• Still needs to convince markets AI is more of an opportunity rather than a threat
• Alphabet trades at a discount to tech peers and in-line with the S&P 500

When will Alphabet release Q3 earnings?

Alphabet will release third-quarter earnings after US markets close on Tuesday October 24. A conference call is scheduled on the same day at 1330 PT.

Alphabet earnings consensus

Revenue is forecast to grow 9.3% from last year in the third quarter to $75.54 billion and diluted EPS is seen rising 36.5% to $1.45, according to a Bloomberg-compiled consensus.

Alphabet earnings preview

The advertising market has been soft for over a year now but Alphabet has proven more resilient than its rivals and continued to grow. Earnings did come under pressure but have now returned to growth. This outperformance is largely down to its dominance in search, with Google advertising sales forecast to increase 8.2% to $58.94 billion.

Meanwhile, YouTube has also made a comeback lately and is forecast to report a 10.3% rise in ad sales to $7.79 billion.

Meanwhile, Alphabet has also made much faster progress at Google Cloud than anticipated. Revenue is forecast to grow 25% this quarter to $8.60 billion as it tries to gain ground on rivals Amazon and Microsoft, and it is set to report its third consecutive quarter of operating profits of $433.6 million.

Alphabet’s quarterly earnings will grow at a faster pace than revenue thanks to tight cost control, the addition of profits from Google Cloud, and a rebound in ad prices, which have recovered faster compared to its social media rivals.

Alphabet’s valuation didn’t get as much as a boost compared to many when AI ripped through Wall Street earlier this year as investors became concerned that the breakthrough technology could severely disrupt its Google search operation, especially with rival Microsoft declaring war and reviving its AI-infused Bing search engine with the goal of becoming Google’s biggest rival. We have seen Alphabet’s valuation rebound as these concerns have eased, although its discount versus other Big Tech stocks suggests markets still see some risk. Alphabet still needs to convince investors that AI is a massive opportunity for Alphabet rather than a threat. Google Cloud is one area that is reaping rewards right now, with the unit having made faster progress than anyone anticipated this year as it benefits from AI tailwinds and workloads.

Recent promotions suggest Alphabet is making a big push to revive its fortunes in the smartphone market by infusing its Pixel with its new AI tools. Other members of Big Tech may be eyeing its monopoly over search, but Alphabet is showing a willingness to make big bets against rivals in hard-to-break markets.

Alphabet currently trades a forward price-to-earnings ratio of 20.5x. That is a deserved premium over advertising rivals like Meta (18.7x) but at a big discount to the broader tech space, with the Nasdaq 100 currently at a ratio of around 30.9x. Alphabet’s valuation is broadly in-line with the S&P 500 average. This suggests markets remain wary of advertising stocks but also means there is headroom for Alphabet to grow its multiple if it can impress this earnings season.

Still, stocks face a challenging backdrop. US treasury yields are offering 5% risk-free to investors for the first time in 16 years and sapping energy out of stocks, which still face a highly uncertain economic outlook in a higher-for-longer interest rate environment. Big Tech remains a solid bet, but investors will be focused on how fast earnings can grow as more challenges arise on the horizon.

Where next for GOOGL stock?

Alphabet has been one of the top performing stocks within the Nasdaq 100 in 2023, having risen almost 54% year-to-date and recovering some of the heavy ground lost in 2022.

The stock has maintained more momentum despite the pullback we have seen in stock markets since August, having continued to set a series of higher-highs. We can see the share price has been moving upward between two trendlines that have been modestly narrowing over the past five months.

We can see the stock initially slipped to $133.95 yesterday before rebounding and closing up for the day. This support matches the ceiling that held throughout the majority of August and is also broadly in-line with the 50-day moving average. The share price is likely to test the supportive trendline if it slips below here.

On the upside, we see $138.50 as the initial goal before it can attempt to set a higher-high by moving above $140.

Nasdaq 100 analysis: Where next?

Alphabet is one of the largest companies within the Nasdaq 100, so it can have a big impact on how the index performs.

Late last week, the index slipped out of the narrowing wedge that had been the overriding theme for several months. That has brought the support zone of between 14,575 and 14,420 back into play. We can see the index briefly slipped to four-month lows yesterday before bouncing back, suggesting this zone is holding for now. Any close below here would set a new lower-low and reinforce the downward momentum we have seen since it began setting lower-highs back in July. It risks slipping below 14,300 in this scenario.

We can see a sharp upper wick yesterday that tested the open on Friday at 14,500. This is the initial goal before it can look to test the 20-day moving average. The volatility seen yesterday suggests the battle between bulls and bears could be intensifying at this key level.

Take advantage of extended hours trading

Alphabet will release earnings after US markets close and most traders must wait until they open before being able to trade. But you can get ahead of the game by taking a position in premarket hours by taking advantage of our service that allows you to trade Alphabet and other Big Tech stocks using our extended hours offering.

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