Alphabet & Meta Set to Release Q3 Earnings

The earnings releases of some of the biggest names in the tech industry are set to hit the markets in the coming days. Let’s take an in-depth look at what Alphabet and Meta could reveal this week:

Alphabet’s Diversification to Pay Off?

Alphabet Inc. (GOOG) is set to release its Q3 2023 financial results on Tuesday, October 24 after market close. Analysts anticipate that the company will report revenues of approximately $63.13 billion, marking a 10.2% improvement compared to the previous year. Earnings are expected to reach $1.45 per share, reflecting a 36.8% increase from the previous year.

In recent quarters, Alphabet undercut estimates twice, with an average negative earnings surprise of 0.9%. Despite this, the company's innovative Artificial Intelligence (AI) techniques, such as the Search Generative Experience, have boosted its search business. The utilisation of generative AI technology has enhanced search results, making them more intuitive and natural.

Google's focus on large language models, multi-search, and visual exploration features has contributed to improved search outcomes. Additionally, enhancements in Google Lens and Google Maps have positively impacted search traffic. Estimates are for Google Search & Other revenues to come in at $43.04 billion, reflecting an 8.9% increase from the previous year.

Google's advertising revenues are also expected to grow due to its generative AI-infused advertising offerings and stabilisation in advertisers' spending. The consensus estimate for Google advertising is $58.94 billion, an 8.2% increase from the prior year.

The YouTube platform has experienced growth, particularly in YouTube Shorts, and efforts to strengthen relationships with content creators have been fruitful. This has contributed to growth in Google's Other revenues, estimated at $7.96 billion, a 15.5% increase from the previous year.

According to some, Alphabet's performance is likely to benefit from the momentum gained by Android 13 and Pixel devices in the third quarter. Google Services revenues are estimated at $66.74 billion, reflecting an 8.7% increase from the prior year.

In the cloud market, Alphabet has been gaining ground with its Google Cloud Platform and Google Workspace. The generative AI-backed cloud offerings have driven Google's momentum in the cloud services sector. Google Cloud revenues are expected to reach $8.54 billion, a 24.3% increase from the previous year.

Alphabet's diversification and innovations in AI technology are expected to play a crucial role in its Q3 2023 financial performance. Whether traders will see tomorrow’s figures as encouragement to continue Alphabet shares’ 54% upward climb so far in 2023 remains to be seen. (Source:Yahoo Finance)

Meta Continues to Attract

Social media giant Meta (META) is scheduled to release Q3 earnings on Wednesday, October 25th after the ring of the closing bell. The company anticipates total revenues between $32 billion and $34.5 billion for the quarter, with favourable Forex expected to boost year-over-year revenue growth by approximately 3%. Analysts project third-quarter revenues to reach $33.43 billion, marking a 20.62% increase from the previous year. Earnings are estimated at $3.57 per share, reflecting a substantial growth of 117% compared to the year-ago quarter. 

Meta's robust performance can be attributed to Facebook's expanding user base, with over 3.03 billion daily active users, and the growing adoption of features like reels, contributing to higher engagement levels and user growth worldwide, particularly in Asia Pacific.

The company's Asia Pacific Daily Active Users (DAUs) are estimated to reach 894 million, showing 5.8% in year-over-year growth, leading among global regions. Monthly Active Users (MAUs) are also expected to grow in both Asia Pacific (2.7% to 1.347 billion MAUs) and the Rest of World (3.4% to 1.004 billion MAUs).

Meta's success is driven by the popularity of its offerings, such as Instagram, WhatsApp, Messenger, and Facebook, supported by the effective use of artificial intelligence to engage users. However, challenging macroeconomic conditions and high inflation have likely constrained ad spending budgets, impacting ad revenues in the quarter.

Furthermore, Meta faces challenges in its ad revenue business due to ad targeting-related issues stemming from Apple's (AAPL) iOS changes, which have complicated ad targeting and increased costs without a clear measurement of outcomes.

In the second quarter of 2023, Meta's ad revenues represented over 99% of total revenues, rising nearly 12% year over year to reach above $31 billion. Projections for third-quarter 2023 ad revenues stand at $32.37 billion, marking an 18.8% year-over-year growth. Meta's Q3 results will shed light on how these factors shape its performance, and whether its meteoric more than 150% rise in stock price since the top of the year will continue.

Amidst an environment of uncertainty ranging from the monetary to the geopolitical spheres, traders and investors alike may be looking for positive trends on the horizon. If expert analysts’ predictions for this week’s earnings releases are borne out, Alphabet and Meta may be able to provide just that.