TLDR:
- GOOGL stock down 20% year-to-date due to tariff concerns and ad spending pressure
- Q1 earnings report expected April 24, with analysts forecasting EPS of $2.01 and revenue of $89.23 billion
- Recent federal ruling declared Google holds illegal monopolies in online ad markets
- Analysts maintain overall bullish outlook with average price target of $196.94 (30% upside)
- Chinese advertisers pulling back and macro uncertainty cloud Q2-Q3 outlook
Alphabet’s stock has taken a hit this year, dropping 20% as the tech giant grapples with the impact of Trump’s tariff policies. Investors are now focused on the upcoming first-quarter earnings report scheduled for April 24.
Wall Street expects Alphabet to report earnings per share of $2.01, representing a 4% year-over-year increase, on revenue of $89.23 billion, up just 0.7% from the previous year.
The company has a strong track record of meeting or exceeding earnings expectations, with only one EPS miss in the past nine quarters. This consistency offers some reassurance to investors during uncertain market conditions.
Jefferies analyst Brent Thill believes Alphabet will deliver solid Q1 results but warns that the macro environment and tariff concerns have created uncertainty for Q2 and Q3 performance.
Ad Revenue Under Pressure
Advertising, which accounts for approximately 75% of Alphabet’s revenue, is facing headwinds. Channel checks indicate Q1 ad performance was “in line with target,” but the outlook remains cloudy.
Chinese advertisers are pulling back spending, prompting Thill to reduce his Q2 gross revenue estimate by 3% to $91.7 billion, below the Street’s $93.7 billion forecast.
For fiscal year 2025, Thill projects total revenue of $382 billion, slightly below consensus estimates. He expects low to mid-single-digit growth due to tough comparisons from election and Olympics-related spending.
Advertisers have already set their Q2 budgets, but Thill cautions that ad spending could tighten in the second half of 2025, primarily due to tariff concerns.
More clarity on advertising budgets may emerge next month during the TV Upfront event, when many advertisers announce their spending plans.
Legal Challenges Mount
Adding to Alphabet’s challenges, a federal judge ruled on April 17 that the company holds illegal monopolies in online ad markets. The judge determined that Google dominates both the tools publishers use to sell ads and the systems advertisers use to buy them.
The Department of Justice has suggested that Google should be forced to divest parts of its ad business, including Google Ad Manager and its ad exchange platform.
Cantor Fitzgerald analyst Deepak Mathivanan estimates that such divestments could reduce Earnings Before Interest and Taxes (EBIT) margins by approximately 2 percentage points in 2026.
Growth Opportunities Remain
Despite these challenges, many analysts remain optimistic about Alphabet’s prospects. Citi analysts highlight advancements in AI, including Search’s AI Mode and the new Gemini model, as potential growth drivers.
Google Cloud is well-positioned to benefit from Gemini AI advancements, with management reaffirming a $75 billion capital expenditure commitment for cloud and AI infrastructure this year.
Thill expects the $32 billion acquisition of cybersecurity firm Wiz—Alphabet’s largest acquisition ever—to enhance Google Cloud Platform’s market footprint.
YouTube’s unique multi-channel position enables it to “capture a broader reach” compared to competitors, according to industry checks cited by Thill.
First-quarter EBIT margins are expected to hold steady at around 38.1%, supported by continued cost discipline despite market volatility.
Valuation Looks Attractive
From a valuation perspective, GOOGL stock is trading at just 10 times next twelve months EV/EBITDA, representing an 18% discount to its 10-year average of 12.2 times.
This valuation is approaching the stock’s historical low of 8.9 times, suggesting potential upside for investors willing to weather near-term uncertainty.
Wall Street maintains a positive outlook on Alphabet stock, with 27 Buy ratings and 10 Hold ratings among analysts. The average price target stands at $196.94, implying a 30% upside from current levels.
Options traders are pricing in a 6.58% move in either direction following the earnings announcement, according to TipRanks’ Options tool.
Main Street Data reports that Google Search & Other advertising revenue reached $54 billion in the most recent quarter, reflecting a 13% year-over-year increase.
Analysts at Jefferies maintain a Buy rating on GOOGL stock with a $200 price target, suggesting a 32% upside over the next year.
