Can Alphabet’s Q1 earnings arrest its stock’s slump?

By ForexTime 

• Alphabet’s stocks down 19.2% year-to-date; market cap now US$ 1.86 trillion
• Company set to unveil Q1 earnings after US markets close Thursday, April 24th
• Investors eager for updates on Cloud margins, AI capex plans, tariff impact
• Alphabet’s share price forecasted to move 5.8% up/down when US markets reopen Friday
• Wall Street lowers 12-month target price; still a strong buy with 33% potential upside

After US markets close this Thursday, April 24th, Alphabet is set to unveil its Q1 financial results.

Despite a rebound yesterday (Tuesday, April 22nd), Big Tech stocks have been languishing in the run up to this upcoming set of earnings reports.

The current record high of US$208.60 for Alphabet’s C-class shares (no voting rights) were from February 4th – the day of its last earnings announcement – when it announced slowing growth in its Cloud segment and lower-than-expected revenue in Q4 2024.

Since then, this stock has fallen:

• Intraday prices: as much as 31.6% (Feb 4th intraday high through April 7th intraday low)
• Closing prices: 26.2% lower (Feb 4th close through April 22nd close)

Why are US tech stocks falling?

US President Donald Trump’s erratic policy rollout, especially surrounding trade tariffs, have dented the aura surrounding “US exceptionalism”.

US tech stocks certainly have been one of the primary victims from this major blow to risk-taking activities across global financial markets.

For comparison, the 19.2% year-to-date drop in Alphabet’s C-class shares:

• are almost double the S&P 500’s 10.1% decline so far this year
• exceeds the tech-heavy Nasdaq 100 index’s 13% year-to-date drop

Alphabet’s Q1 earnings: What to look out for?

1) Cloud compression?

Revenue from its Cloud segment is expected to breach US$12.3 billion for Q1 2025 – the segment’s highest ever top line number.

However, the operating income for the segment is expected to dip back below the US$ 2 billion figure:

• Q4 2024: $2.09B down to …
• Q1 2025: US$1.94B … marking the first contraction for this line item since Q3 2023.

Investors and analysts will be keen to find out how Alphabet can buttress its Cloud margins, even as rising AI-fueled demand also requires more infrastructure investments.

NOTE: According to Alphabet CEO Sundar Pichai, Google’s Cloud is still smaller in size relative to Amazon’s and Microsoft’s.

And that brings us to the second key area to look out for …

2) AI integration (Gemini, AI agents) and capital expenditure (capex) plans

The integration of Gemini appears to be central to the growth of Alphabet’s Search segment – which accounts for more than half (55 – 57%) of total revenue in recent quarters.

Also, Gemini and other AI use cases are expected to help grow its Cloud segment from its:

• Q1 2024: 11.9% of total company revenue for the quarter
• Q1 2025: 13.8% of total company revenue for the quarter

Looking ahead, recall that the company had already issued capex guidance for US$75 billion for this year’s capex.

And that’s despite the risks posed DeepSeek’s apparent showing that AI gains can be achieved using lower-cost models.

The slightest hint of a pullback in capex plans could send Alphabet’s stocks tumbling on fears that the fervor for all things AI is losing momentum still.

3) Tariff impact

Since the flurry of tariff-related announcements this month, the expected impact on Alphabet’s financial figures appears limited to its:

• hardware sales (think Pixel phones) and also …
• Cloud infrastructure (think of the chips required to build out Alphabet’s data centers).

Hence, Alphabet’s share price is bound to reflect the company’s guidance on the tariffs’ impact on future earnings.

Beyond the main themes listed above, here are some headline Q1 figures to look out for:

• Revenue: forecasted at US$75.4 billion
• Net income: forecasted at US$24.7 billion
• Earnings per share (EPS): forecasted at US$ 2.04

Potential Post-Earnings Scenarios

Note that markets currently predict that Alphabet’s stocks could move 5.8% up or down when US markets reopen on Friday, April 25th – the day after Alphabet’s Q1 earnings announcement.

• BULLISH: Should Alphabet’s past quarterly financials and forward guidance help restore sentiment surrounding this stock, that could help pare its year-to-date declines.

Using Tuesday’s closing price of $154.02 as a reference point, a 5.8% climb would see this stock breaking above its 21-day simple moving average (SMA) and reaching around $163 – closing in on its mid-April intraday high.

• BEARISH: Should Alphabet announce lower-than-expected Q1 2025 financial results, while citing greater concern about its earnings outlook, a 5.8% move downwards from Tuesday’s closing price should see this stock opening around $145 this Friday.

Still, much may yet happen across US stock markets over the next 2 days (Wednesday’s and Thursday’s cash sessions) which could drastically alter the above-listed numbers.

Over the next 12 months …

Wall Street analysts are still bullish on this stock, with:

• 20 “Buy” calls
• 1 “Hold”
• 0 “Sells”

By this time in 2026, this stock is forecasted to have an upside potential of 34%, eventually touching $205.33.

To be clear, so far this month, many research houses including Morgan Stanley, UBS, Citi, Mizuho, and Bank of America have lowered their respective 12-month target prices on this stock.

And there’s bound to be more revisions after what Alphabet conveys to the world this week.

In short, this upcoming earnings release is set to hold great influence over how Alphabet’s shares perform, both in the immediate aftermath, and for the longer-term.

Article by ForexTime

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