Alphabet GOOGL) will officially kick off the Q2 earnings season for the Magnificent Seven when it reports its quarterly results after Wednesday’s closing bell on July 22.
As the first mega-cap technology company to report, Alphabet could set the tone not only for the tech sector, but also for the broader market heading into reports from Microsoft MSFT), Meta Platforms META), Amazon AMZN), Apple AAPL), and Nvidia NVDA) over the coming weeks.
With AI remaining Wall Street’s dominant investment theme, investors will be looking beyond another likely quarter of double-digit revenue growth to determine whether Alphabet’s massive infrastructure investments will generate attractive returns.
Alphabet’s Q2 Expectations Remain High
Wall Street expects Alphabet to post another impressive quarter, with consensus estimates calling for earnings of approximately $2.90 per share on revenue of $101.22 billion when including Traffic Acquisition Costs (TAC), which are the payments Google makes to partners for directing traffic to its search and advertising services.
The top-and bottom-line figures would represent roughly 24% year-over-year growth, respectively.
Several key business segments and underlying metrics will likely determine whether Alphabet can exceed expectations:
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AI-related capital expenditures (CapEx)
Cloud continues to be one of Alphabet’s fastest-growing businesses, with demand for AI infrastructure and enterprise cloud services expected to remain robust. Based on Zacks estimates, Google Cloud revenue is expected to soar 67% to $22.79 billion from $13.62 billion a year ago.
Meanwhile, investors will be watching to see whether Gemini AI strengthens Search and improves monetization across Alphabet’s product ecosystem.
The Zacks ESP
The most intriguing reason for optimism is that the Zacks ESP (Expected Surprise Prediction) indicates Alphabet could once again surpass earnings expectations.
To that point, the Most Accurate and recent estimate among Wall Street analysts has Q2 EPS slated at $2.93 and nearly 2% above the underlying Zacks Consensus of $2.87 as shown below (Current Qtr).
Alphabet has exceeded earnings expectations for 13 consecutive quarters with a very impressive average EPS surprise of 34.43% in its last four quarterly reports.
Frozen v2 Momentum
Providing a near-term catalyst, Alphabet shares are moving higher in Monday’s trading session after reports that Google is developing a next-generation AI server chip, informally dubbed “Frozen v2,” that would run its Gemini models more efficiently by embedding portions of the model’s architecture directly into the silicon.
