Wall Street expects Google parent Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) to post first-quarter FY21 revenue growth of 25.1% to $51.51 billion from the pandemic-induced surge in digital ad spending despite regulatory restrictions, the Wall Street Journal reports. Profit is estimated to grow 56.7% to $10.72 billion.
Earnings Thesis: Recently, Snap Inc (NYSE: SNAP) Verizon Communications Inc (NYSE: VZ) posted significant advertisement-fueled revenue growth. Interestingly, Google’s search engine, Maps, and YouTube have a market share of 92%, 89%, and 73%, respectively.
The pandemic induced remote activities drove higher demand for Google search triggered by takeout meal, grocery-delivery options, and YouTube videos at the cost of the company’s advertisement revenue. Thus, the brands also shifted the ad spending from print, television, and in-store promotions to Google search customers.
Google’s search market share dropped from 61% to 57% last year. In comparison, Amazon.Com Inc (NASDAQ: AMZN) gained market share from 13% to 19% during the period.
Google’s search engine and advertising businesses were also vulnerable to multiple regulatory antitrust lawsuits, including Epic Games and publisher Daily Mail over anti-competitive practices.
Google continues to drive spending to remain the default search engine on iPhones and other devices. Analysts estimated the traffic-acquisition costs to rise 23% to $9.16 billion during the first quarter.
Google also remains invested in the diversification from the core ad business into cloud-computing service to challenge Amazon and Microsoft Corp (NASDAQ: MSFT). Analysts estimated the recent billion-dollar deals to drive sales by 46% to $4.07 billion for the quarter.
Google’s eight-year, $1 billion-plus contract with Spanish-language broadcaster Univision Communications Inc faced flak over anti-competitive practices. The deal was won in part by packaging, including YouTube and search elements.
Google will be questioned over digital privacy during the analyst call.
Apple Inc’s (NASDAQ: AAPL) recent software update with an anti-tracking feature could compel Google to follow on its Android operating system. All of which can hamper Facebook Inc’s (NASDAQ: FB).
Price action: GOOG shares traded lower by 0.6% at $2,312.8 on the last check Tuesday.
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