Despite initial concerns about the threat posed by OpenAI’s ChatGPT, Google has managed to maintain its dominance in the digital advertising market. Analysts believe that Google is well-prepared to compete against OpenAI, especially with the support of its major investor, Microsoft.
Deutsche Bank analyst Benjamin Black notes that Google’s incorporation of artificial intelligence and machine learning tools has not resulted in any significant shift in market share to Bing. In fact, ad budgets are shifting back to Google, indicating a decline in ad spend on Bing. Black maintains a positive outlook on Google’s future, with a buy rating on the company’s shares and a price target of $125.
Not only is Google expected to perform well in digital advertising, but its rivals Meta Platforms, Pinterest, and Yelp are also anticipated to benefit as ad agencies increase their spending. Economic uncertainties have led to a cautious start in 2023, but as the year progresses, ad agencies are becoming more willing to invest.
Analysts remain confident in Google’s resilience in search despite the presence of Bing as a competitor. Additionally, there is optimism surrounding the growth of YouTube, especially with the upcoming launch of NFL Sunday Ticket on YouTube TV.
When Alphabet announces its earnings after Tuesday’s market close, analysts expect the company to report earnings of $1.34 per share. This represents an increase from $1.21 per share reported in the previous year. Projections from various sources, including hedge funds and academics on Estimize, align with this average forecast.
The FactSet consensus predicts that Alphabet will generate $72.8 billion in total revenue, a increase from the previous year’s $69.9 billion. Estimize contributors also expect $72.8 billion in revenue. Excluding traffic-acquisition costs, both FactSet and Estimize analysts forecast $60.25 billion in revenue.
Alphabet shares have experienced a 36% gain so far this year. Meanwhile, the broader S&P 500 is up by 18% in 2023.
Out of the 50 analysts tracked by FactSet who cover Alphabet shares, 38 have buy ratings and four have hold ratings. The average share-price target is $135.94.
What to Watch For
Investors are closely monitoring the performance of Google Cloud, which contributes a small portion to the company’s overall revenue.
Why? As businesses develop their generative-AI strategies, it remains uncertain how much benefit Google Cloud will experience in the second quarter and beyond. Jefferies analyst Brent Thill suggested that any headwinds from ongoing cost-optimization could be balanced by a second-half tailwind, as stated in a recent note.