Alphabet Inc. (GOOGL), parent of search giant Google and one of the tech world's undisputed stars, has nonetheless posted less than brilliant performance this year, its stock drastically underperforming its fellow FAANGs and the S&P 500. That disappointing performance reflects major headwinds facing the company that investors will focus intently on when it reports earnings as early as this week.

Those headwinds include slowing revenue growth, and the financial disruption that could be caused if the U.S. government attempts to break up Alphabet. Some analysts say the company would be worth 50% more broken up.

Alphabet "faces concerns on potential for slowing search revenue, high expense growth, regulatory risks and a lack of disclosure," says Bank of America in a recent report. "After last quarter's revenue weakness and disclosure vacuum, we think the set up is more positive." The BofA report adds, "The key question is if management sees any need to try to move stock higher, or if regulatory and other competitive concerns keep a lid on disclosure and new business commentary."

To be sure, Alphabet's earnings picture looks robust in the short term. Analysts expect Google to post earnings per share of $11.30 for the quarter ending June, compared to year-ago EPS at $4.54.

Investors' big concern is signs of a possible longterm decline in revenue growth. For starters, in 1Q ending March, Alphabet reported weaker-than-expected results in which revenue slowed to 15.3% year-over-year, a sharply slower pace than 19.9% growth in Q4 and also below 24.4% growth in the Q1 of 2018, per the Wall Street Journal. For Q2, analysts' estimate revenue will rise 16.9%, according to analysts surveyed by Yahoo Finance. While that's slightly faster than Q1, it's still far slower than Alphabet's historic growth rates.

What Investors Will be Looking For

A focal point for investors, when Google reports on July 25, will be how soft revenue growth will be in the June quarter. Any downshift that's much steeper than consensus estimates will provide ammunition for bears who see Google’s sales slump as reflecting a systemic issue for the company, per Barron’s

Evercore ISI analyst Kevin Rippey recommends asking key questions such as, what is driving the slowdown, whether it was organic or self-inflicted, if there is a historical precedent for reaccelerating revenue growth, and if anything in the pipeline can act as a positive catalyst. Rippey views slowing sales as reflecting a temporary platform cleanup during which Google removed players participating in ad fraud in an effort to improve the long-term health of its business. 

Even with that optimistic view, investors will be watching closely for evidence that Google's core ad revenue business is slowing with the economy or from inroads from rivals such as Snap Inc. (SNAP), Twitter Inc. (TWTR), and others. A material softening in demand for search advertising would be a severe headwind as it ramps up several new products to boost sales. 

These new ad initiatives have spurred some bulls to lift their forecasts. Google has “among the best ad product pipelines we have seen” in at least four years, says Deutsche Bank analyst Lloyd Walmsley, per Barron’s. “We see an accelerating pace of new ad product making us meaningfully more confident in the 2020 outlook,” he added. 

Looking Ahead

Google’s video platform YouTube also will be a focal point of investors as Alphabet reports. Specifically, shareholders will want to know how much rising criticism of YouTube from politicians could lead to oversight. That, of course, would pale next to a U.S. antitrust lawsuit. On that topic, investors will seek any insight they can from Alphabet's executive team regarding how they plan to manage the company for growth, and minimize any damage, during a protracted battle with the federal government.