Alphabet Set to Impress in Cloud, But Can AI and Ads Deliver? What to Expect Ahead of Earnings

As Alphabet gears up to report its quarterly earnings, investors are honing in on three key segments: cloud computing, digital advertising, and artificial intelligence. Angelo Zino, Senior VP Tech Analyst at CFRA, believes Alphabet is well-positioned to kick off tech earnings season. “They really have two key segments that you can kind of look at relative to the others. That is their cloud business and then you have the digital ad business,” Zino said​.

He expects Alphabet’s cloud segment to post about 28% growth in Q1, calling that number “more than attainable,” and anticipates cloud growth will remain in the 25% to 30% range throughout the year, supported by the rollout of Blackwell, the company’s advanced chip infrastructure​.

While the cloud outlook is optimistic, Zino expressed caution about Alphabet’s advertising revenue, citing global macroeconomic uncertainty and shifts in enterprise spending. “We kind of ratchet our numbers down slightly on the digital ad side of things more in Q2 to Q4,” he noted, though he still expects high single-digit growth in search and YouTube ad revenue for Q1​. On the AI front, Zino highlighted Gemini 2.0, Alphabet’s next-gen model launched in December, as central to its future. “It requires a lot more compute... and that’s going to help drive demand on the cloud side of things,” he explained. However, with expected capital expenditures reaching $75 billion this year, he said Alphabet must “start seeing some return on those investments” as it competes with ChatGPT and others in the generative AI space. Despite the long road to profitability, Zino emphasized that Alphabet's valuation remains attractive and predicted a potential $70 billion stock buyback could help buoy investor sentiment​.