Alphabet's AI Potential and Antitrust Woes: A Balancing Act Ahead of Q1 Earnings

As of last week, Google A (GOOGL) saw a decline of 1.42%, marking three consecutive days of losses, resulting in a total decline of 4.97% over the last three days. The stock has dipped 3.81% over the week and experienced a year-to-date drop of 20.06%, positioning its latest market valuation at approximately 1842.64 billion USD.

Alphabet, Google's parent company, is set to release its first-quarter financial results this Thursday after market close. Analysts are optimistic about Alphabet's ability to navigate economic uncertainties. The expectations for revenues stand at 89.22 billion USD, marking an 11% growth year-on-year, while projected net income is 24.71 billion USD, translating to earnings of 2.01 USD per share. This forecasts a slight improvement from last year's 23.66 billion USD in net income and earnings of 1.89 USD per share.

Of the 19 analysts tracking Alphabet surveyed by VisibleAlpha, 14 have given a "buy" or equivalent rating, while the others have offered a "hold" recommendation. The consensus target price is close to 195 USD, suggesting a possible 29% increase from Thursday's closing price of around 151 USD.

Citigroup analysts have recently indicated their belief that Google Search is one of the platforms least impacted by macroeconomic forces and the quickest to recover. They also highlighted that with the application of AI tools like Google's Search AI model and the company's latest release, the Gemini language model, Google showcases significant growth potential.

Morgan Stanley similarly acknowledged that AI-driven innovations in search and the YouTube platform as the foundation of their confidence in Google's long-term sustainable growth. Target prices for Alphabet set by Citigroup and Morgan Stanley are 195 USD and 185 USD, respectively.

However, Alphabet faces numerous external challenges and opportunities. On April 17, U.S. District Judge Leonie Brinkema ruled that Google's digital ad market practices violated antitrust laws. In less than a year, two federal judges have deemed Alphabet's efforts in monopolizing both the advertising technology sector and search business as illegal, which might lead to future business restructuring and changes in the competitive landscape of its ad tech sector.

During the upcoming earnings call, Alphabet might field questions from analysts regarding these rulings and future directions. Citigroup analysts mentioned that "if Google were to eventually divest its ad network due to this ruling, it wouldn’t be a surprise" although the core business may remain largely unaffected.

As of Thursday's close, Alphabet's stock price has already dipped a fifth over the year 2025. With Good Friday, the U.S. stock exchange was closed on Friday.

In the earlier financial disclosures, Alphabet's Q4 revenue reached 96.469 billion USD, marking a 12% increase but fell short of analyst expectations of 96.62 billion USD. Net income reached 26.536 billion USD, showing 28% growth, with earnings per share at 2.15 USD, exceeding the prior year's 1.64 USD but shy of market predictions of 2.13 USD.

That quarter's performance in Google Search slightly outperformed analyst projections, bringing in 54 billion USD in sales, although overall advertising results seemingly lagged behind Meta Platforms (META.US). Google's cloud division showed unsatisfactory growth, with a slowdown compared to the third quarter.

Despite this, Google has announced plans to continue heavy investments into AI infrastructure through 2025, anticipating capital expenditures to hit a remarkable 75 billion USD this year. CFO Anantharaman Ashkennazc disclosed the expected investment for the first quarter to range between 16 to 18 billion USD, aimed at meeting growing computational demands from clients.

Internal transactions at Google A were revealed on April 18, noting multiple insider sales. Board member Pichai Sundar sold substantial shares on April 16, totaling approximately 1.27 million shares in multiple transactions. The selling prices ranged, with transactions valued extensively, indicative of strategic selling activities within the company.

Alphabet Inc., acting as the holding entity for Google and its subsidiaries, was reconstructed in 2015. Google was originally founded in California on September 4, 1998, and re-established in Delaware in August 2003. Alphabet spans technology, life sciences, capital investment, and research sectors. Its subsidiaries include Google, Calico, GV, Google Capital, and Google Fiber. Google remains committed to offering a vast array of internet-based products and services, focusing on internet search, cloud computing, and advertising technologies.

On April 17, Google A (GOOGL) achieved a trading volume of 50.02 billion USD, ranking 11th among U.S. stocks for that day, experiencing a 15.56% increase in trading volume compared to the previous day, with daily trading volume standing at 33.0466 million shares.

On that same day, Google A (GOOGL) reduced its stock price by 1.42%, closing at 151.16 USD. Over the last five trading days, it has experienced a decline of 3.81%, a 2.25% dip in April overall, a year-to-date decline of 20.15%, and a 1.90% decrease within the past 52 weeks.

Alphabet Inc., serving as Google’s and its subsidiaries’ holding company, was restructured in 2015. Google, a pioneer in internet search, cloud computing, and advertising technologies, was originally founded in California on September 4, 1998, and re-established in Delaware in August 2003.

(Data Source: iFinD)