Results: Alphabet Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Alphabet Inc. (NASDAQ:GOOGL) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat forecasts, with revenue of US$81b, some 2.3% above estimates, and statutory earnings per share (EPS) coming in at US$1.89, 25% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Alphabet

Taking into account the latest results, the most recent consensus for Alphabet from 44 analysts is for revenues of US$345.8b in 2024. If met, it would imply a decent 8.7% increase on its revenue over the past 12 months. Statutory earnings per share are predicted to grow 13% to US$7.52. In the lead-up to this report, the analysts had been modelling revenues of US$342.7b and earnings per share (EPS) of US$6.82 in 2024. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the decent improvement in earnings per share expectations following these results.

The consensus price target rose 9.8% to US$183, suggesting that higher earnings estimates flow through to the stock's valuation as well. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Alphabet analyst has a price target of US$220 per share, while the most pessimistic values it at US$143. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Alphabet's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 12% growth on an annualised basis. This is compared to a historical growth rate of 17% over the past five years. Compare this to the 112 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 9.8% per year. Factoring in the forecast slowdown in growth, it looks like Alphabet is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Alphabet following these results. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Alphabet analysts - going out to 2026, and you can see them free on our platform here.

We also provide an overview of the Alphabet Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.