Cloud Growth to Quantum Chips: Key Highlights in Google's 2024 Q4 Results

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Over the past four quarters, this tech giant has consistently exceeded expectations in both earnings per share (EPS) and revenue.

Analysts predict Alphabet's EPS to be 2.12,with revenue reaching 96.5 billion.

Key highlights of this earnings call may include updates on Gemini, significant growth in Google Cloud revenue, and performance of the advertising division.

$Alphabet-C (GOOG.US)$ is set to announce its Q4 2024 earnings after the market closes on February 4. Over the past year (2024), its stock price has surged by 35.62%, outperforming the S&P 500's gain of 23.31%. The stock hit an all-time high of $202.88, driven in part by the release of its new "quantum chip" Willow, which sparked a wave of interest in quantum computing.

Cloud Growth to Quantum Chips: Key Highlights in Google's 2024 Q4 Results

Q4 2024 Earnings Expectations

According to analysts' projections, Google's adjusted EPS for Q4 is expected to be $2.12, representing a 29.3% increase compared to $1.64 per share in the same period last year.

The revenue is expected to reach $96.71 billion. Among this, the total advertising revenue is projected to be $71.766 billion, Google Cloud revenue is expected to be $12.155 billion, and revenue from subscriptions, platforms, and devices is expected to be $11.994 billion.

Click to subscribe: Alphabet Q4 2024 earnings conference call

Key Focus Areas for This Earnings Report

Advancements in the Gemini AI Model

CEO Sundar Pichai highlighted during the last earnings call that the company's full-stack approach to AI continues to solidify its leadership in the field. As of Q3, usage of AI tools like the Gemini API has grown nearly 40-fold in six months.

Strong Momentum in Google Cloud

This growth is largely driven by robust demand for AI infrastructure and generative AI solutions. Pichai noted in the previous quarter that the company's investments in AI are "paying off." Google Cloud revenue grew 35% year-over-year in Q3, reaching $11.4 billion.

Continued Growth in the Advertising Division

Analyst Oliver Rodzianko suggests that advertising revenue could grow approximately 12-12.5% year-over-year in Q4 2024. Election-related ad campaigns and seasonal peaks, such as Black Friday, Cyber Monday, and holiday spending, are expected to drive this growth.

YouTube continues to see strong growth in brand and direct-response advertising, with Shorts monetization gaining traction as it competes with TikTok and Instagram Reels. Over the past 12 months, YouTube's subscription revenue has officially surpassed $50 billion.

Breakthroughs in Quantum Computing

On December 10, 2024, Google announced a significant breakthrough in quantum chip technology, which became a catalyst for market sentiment. Quantum computing stocks emerged as a "dark horse" in the year-end U.S. stock market rally, with companies like $Quantum Computing (QUBT.US)$ and $Rigetti Computing (RGTI.US)$ surging tenfold.

Google's stock also hit consecutive all-time highs. However, as Google clarified in its announcement, quantum computing remains far from any commercial applications. Willow represents a critical step in the journey toward building a practical quantum computer.

Highlights from Q3 2024

On October 29, Alphabet released its Q3 earnings, once again surpassing Wall Street expectations, with shares rising over 5% in after-hours trading.

– Earnings per share: $2.12 vs. $1.83 expected

– Revenue: $88.27 billion vs. $86.44 billion expected

– Google Advertising: $65.9 billion vs. $65.5 billion

– YouTube advertising revenue: $8.92 billion vs. $8.89 billion expected

– Google Cloud revenue: $11.35 billion vs. $10.79 billion expected

Analyst Commentary

Bank of America analyst Justin Post stated in a report: "In 2024, Google's stock outperformed the S&P 500, benefiting from the launch of new AI products, stringent cost controls, improved cloud growth, and positive guidance revisions."

However, challenges remain, including disruptions from emerging Gen-AI search platforms and potential adverse rulings in the Department of Justice's antitrust case.

As the search business continues to dominate, 2025 will be a pivotal year, potentially cementing Google's position as an AI leader. Analysts forecast Google's search ad revenue to grow nearly 10% in 2025, reaching $216.5 billion.

According to the consensus forecast of analysts, the average target price of Alphabet is $215.95, which implies an 11.4% upside potential from the closing price of $193.77 on January 28, 2025.

Source: Bloomberg, Yahoo Finance, Seeking alpha

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