- Analysts estimate EPS of $25.65 vs. $26.29 in Q1 FY 2021.
- Google Cloud revenue is expected to rise YOY.
- Revenue is expected to rise but at a slower pace compared to recent quarters.
Google (Alphabet) Inc. (GOOGL) in 2021 had a blockbuster year when it comes to financial performance. Earnings per share (EPS) skyrocketed as revenue rose to more than a quarter trillion dollars annually, $257.6 billion to be exact, double the level of three years ago. The key driver of this growth has been rising demand for digital advertising space as more people have spent greater amounts of time online during the pandemic.
Investors will be watching to see if Google can maintain its strong momentum when it reports earnings on April 26, 2022 for Q1 FY 2022. Analysts are not optimistic. They expect the company's earnings per share to decline for the first time in seven quarters. Revenue is expected to rise but at its slowest pace in six quarters.
Investors will also be focusing on revenue for Google Cloud, one of Google's main business segments. Google Cloud offers tools for developers through a cloud platform as well as other workplace collaboration tools. Analysts expect Google Cloud revenue to expand but at its slowest quarterly pace in at least three years.
Alphabet's shares have outperformed the broader market over the past year. The stock's performance gap with the market gradually widened from around mid-May 2021 through to about mid-November. That gap has since narrowed considerably, although the stock is still outperforming. Shares of Alphabet have provided a total return of 6.2% over the past year, above the S&P 500's total return of 3.3%.
Google (Alphabet) Earnings History
Google reported Q4 FY 2021 earnings results that beat analysts' expectations. EPS rose 37.7% compared to the year-ago quarter, its slowest pace since EPS declined in the second quarter of FY 2020. Revenue grew 32.4% year over year (YOY), marking its slowest pace since the final quarter of FY 2020. The company noted that it experienced strong growth in both its advertising and cloud computing businesses.
In Q3 FY 2021, Google reported earnings and revenue that beat consensus estimates. EPS increased 70.7% YOY, slowing dramatically from a YOY pace of 169.1% set in the previous quarter. Revenue expanded 41.0% compared to the year-ago quarter, also slowing from the previous quarter's rapid pace. The company highlighted that its investments to support long-term growth were reflected in strong financial performance during the quarter. The company has been investing heavily in artificial intelligence (AI) in recent years.
Analysts expect Google's financial performance to weaken considerably in Q1 FY 2022. EPS is expected to fall 2.4% YOY, which would be the first earnings decline since Q2 FY 2020. Revenue is expected to grow 23.3%, continuing a deceleration trend that began in the third quarter of FY 2021. For full-year FY 2022, analysts forecast EPS to rise 3.5%, which would be its slowest pace in at least five years. Annual revenue is expected to increase 17.7%, slowing considerably from last year's pace.
|Google (Alphabet) Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||25.65||26.29||9.87|
|Google Cloud Revenue ($B)||5.7||4.0||2.8|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also be focused on Google Cloud revenue. Google Cloud is one of Alphabet's primary business segments. The cloud segment provides developers with a highly scalable and reliable platform for building, testing, and deploying applications. It also offers workspace collaboration tools, including apps like Gmail, Docs, Drive, Calendar, Meet, and more. Revenue is generated through the collection of fees related to those services. As of the end of the fourth quarter of 2021, Google Cloud had an estimated 9% of the global cloud market, ranking it third behind Microsoft Corp.'s Azure and top-ranked Amazon.com Inc.'s Amazon Web Services.
Google's Google Cloud Revenue has grown rapidly over the past four years, more than tripling from $5.8 billion in FY 2018 to a total of $19.2 billion in FY 2021. In the second quarter of last year, Google Cloud Revenue rose 53.9% YOY, its fastest pace since the third quarter of FY 2019. It then slowed to a pace of 44.9% YOY in Q3. Growth remained relatively steady at a pace of 44.6% YOY in Q4 FY 2021. Analysts expect Google Cloud revenue to decelerate again, forecasting a pace of 41.9% YOY in Q1 FY 2022. That would be the slowest pace of growth in at least 14 quarters. For full-year FY 2022, analysts forecast that Google Cloud revenue will rise 38.4%, which would be the slowest pace in at least five years.
Visible Alpha. "Financial Data."
The Wall Street Journal. "Google Parent Caps Blockbuster Year With Sales Gains."
Alphabet Inc. "Form 10-K for the fiscal year ended December 31, 2021," Pages 6 & 7.
Alphabet Inc. "Alphabet Announces Fourth Quarter and Fiscal Year 2021 Results," Page 1.
Alphabet Inc. "Alphabet Announces Third Quarter 2021 Results," Page 1.