Alphabet Q4 Earnings Preview: Google Search Ads In Focus Following 'Code Red' On ChatGPT

Alphabet Inc (NASDAQ: GOOG) is set to report its fourth-quarter results after the bell. The stock is well off its highs from last year, but up more than 20% year-to-date heading into the print. 

Here's a look at what to expect from the search giant after the close.

What To Know: Alphabet is expected to turn in fourth-quarter earnings of $1.20 per share on quarterly revenue of $75.62 billion, according to Benzinga Pro. 

In the third quarter, the Google parent company reported earnings of $1.06 per share, which missed consensus estimates of $1.26 per share. Alphabet reported third-quarter revenue of $69.092 billion, missing estimates of $70.94 billion.

On the third-quarter conference call, Chief Business Officer Philipp Schindler said, "We noted a pullback in spend by some advertisers on YouTube network [in Q2], and these pullbacks ... increased in the third quarter."

The company didn't provide forward guidance, but Alphabet CFO Ruth Porat warned of headwinds from a stronger dollar. "Looking to the fourth quarter, based on the strengthening of the U.S. dollar quarter-to-date, we expect an even larger headwind from foreign exchange," Porat said.

Following the print, CEO Sundar Pichai explained Google was sharpening its focus and updating its priorities.

"Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts," he said.

What To Watch For: AI is likely to be a big focus this quarter. Alphabet shares faced selling pressure following Microsoft Corp's (NASDAQ: MSFT) quarterly report last week. The tech giant doubled down on its investment in OpenAI's ChatGPT a day ahead of the report and then reaffirmed its increased focus on AI on the earnings call.

Near the end of 2022, several reports revealed Google had declared "code red" to deal with the threat AI poses to Google Search. Pichai reportedly had been involved in a series of meetings to define Google's AI strategy not long after ChatGPT took the world by storm. 

Investors will want to pay close attention to see if Google has put any tactics in place to combat the uprising of ChatGPT. 

Advertising strength will also be a key focus point for investors. Alphabet shares are up more than 6% heading into the print, driven by Meta Platforms Inc.'s (NASDAQ: META) surprising advertising results.

Meta said fourth-quarter ad impressions were up 23% on a year-over-year basis. In the third-quarter Alphabet generated approximately 57% of its total revenue from Google Search ads. 

Check This Out: Zuckerberg Eyes Slice Of AI Pie Amid ChatGPT Craze: 'One Of My Goals For Meta Is...'

GOOG Price Action: Alphabet has a 52-week high of $152.10 and a 52-week low of $83.45.

The stock was up 5.68% at $107.19 on Thursday ahead of earnings, according to Benzinga Pro.

Photo: Photo Mix from Pixabay.