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Alphabet (GOOGL) earnings Q3 2021

Google CEO Sundar Pichai speaks during the Google I/O keynote session at Shoreline Amphitheatre in Mountain View, California on May 7, 2019.

Josh Edelson | AFP | Getty Images

Alphabet will report third-quarter earnings after the bell.

Here’s what Wall Street is expecting:

  • Earnings per share (EPS): $23.48 per share, according to Refinitiv estimates.
  • Revenue: $63.34 billion, according to Refinitiv estimates.
  • YouTube advertising revenue: $7.4 billion, according to StreetAccount estimates.
  • Google Cloud revenue: $5.07 billion, according to StreetAccount estimates.
  • Traffic acquisition costs (TAC):¬†$11.16 billion, according to Street Account estimates.

Google’s core advertising business has enjoyed record revenue growth in recent quarters as economies reopened from the pandemic, but analysts are focused on how supply shortages and privacy changes implemented by Apple are affecting spending.

Earlier this year, Apple added prompts in iOS 14 that allow users to keep from being targeted with ads on apps. Snap and Facebook both cited those changes as the biggest reason for business disruptions in the latest quarter.

While Google is better shielded than those companies because it owns the Android operating system, it still relies on Apple for distribution of its apps on iPhones.

Both Google and Apple face mounting scrutiny from regulators, though their stocks haven’t suffered. In August, legislators introduced a bipartisan bill that seeks to bring more competition to the app store market. Under the bill, Google and Apple would not be allowed to tie distribution of an app on their app store to whether a developer uses their payment system.

Google said recently that it would halve its app store fees service fees from 30% to 15%. In July, state attorneys general announced an antitrust lawsuit against Google, alleging the company abused its power over app developers through its Play Store on Android. 

Focus on costs

Investors are paying close attention to traffic acquisition costs, or the money that Google shares with partner sites. During the quarter, Google introduced a search redesign that answers detailed queries, a tweak that could potentially keep users on its site longer and cut down on spending.

As Alphabet attempts to diversify its sources of revenue, the company has been investing heavily in its cloud division, which competes with Amazon Web Services and Microsoft Azure. The division, led by former Oracle executive Thomas Kurian, has shaken up its internal organization as it tries to boost revenue and narrow its losses.

Alphabet is still losing money from its self-driving car company Waymo, which falls in the Other Bets category on its earnings report. Waymo announced during the quarter that it would begin car testing with San Francisco residents, showing progress toward opening its ride-hailing service in a second market.

Alphabet’s earnings could get a boost from start-up investments the company’s venture groups have made in recent years. In September, growth-stage investment group CapitalG generated hefty returns after software company Freshworks’ went public. Also that month, Google’s early-stage investment Group, GV, scored a win from a smaller investment in Toast, which held its IPO.

With plans to bring employees back to offices in January, Google said in September that it was buying another New York City office building for $2.1 billion. The company is also planning another Silicon Valley campus, which will sit adjacent to a new center partly devoted to hardware.

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