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Alphabet Q3 sales expected to surge 23% despite regulatory headwinds

Sales at the Mountain View, California- company are projected to rise to more than US$27 billion, with net income seen climbing to US$10.45 a share, according to analysts' estimates.

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GOOGLE parent Alphabet Inc is expected to report a jump in third-quarter revenue and profit, powered by the Internet search giant's digital-advertising business and growth in its cloud division.

Sales at the Mountain View, California-company are projected to rise 23 per cent to more than US$27 billion, with net income seen climbing to US$10.45 a share, according to analysts' forecast data compiled by Bloomberg.

Any shortfall is likely to weigh on Alphabet's stock, which has tumbled 18 per cent since reaching a record in July, dragged down by a broader rout in technology stocks amid concerns that global economic growth may be weakening.

Here's a look at what else investors are watching closely at Alphabet:

Costs: Google is spending billions of dollars a year to build data centres for its web services and cloud business. Traffic acquisition costs, the fees Google pays to partners to distribute its search engine and ads, will also be scrutinised.

Hardware: Earlier this month, Google showed off two new Pixel smartphones that compete with devices from Apple Inc and Samsung Electronics Co. Despite positive reviews, Google's phones have yet to catch on in a meaningful way. The company's consumer hardware sales are grouped with cloud and app store results in Google's "other revenue" category. That segment grew 37 per cent in the second quarter.

Cloud: Google Cloud chief executive officer Diane Greene has been aggressively courting corporate customers, but the business still lags behind Amazon Web Services and Microsoft Corp's Azure. The booming industry may well be big enough for all three to thrive. Ms Greene's efforts to win more government work have been stymied by some Google employees who say the company shouldn't sell its products to the military, prompting it to drop out of the running for a Defense Department contract valued at US$10 billion.

Regulatory headwinds: In July, European antitrust officials fined Google a record US$5 billion and ordered the company to stop forcing Android phone makers to preinstall its search engine and Chrome browser when the manufacturers use Google's Play app store. Along with other Internet companies, Google is also facing questions about its privacy and data-collection practices and political pressure from some lawmakers, who say it's got too much power over what consumers see online. Any sign that these issues are having an impact on the business will be met with concern. BLOOMBERG

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