Alphabet Inc. (NASDAQ: GOOG) is set to announce its Q4 2017 earnings on January 31. We expect that Google’s search ad revenues improved in Q4 as ad volumes increased, offsetting pressure on cost per click. Additionally, Google continued to sell more ad inventory through its programmatic platform, which is driving aggregate paid clicks and revenues across both the PC and mobile verticals. We also expect TrueView video ads, which power YouTube, to continue to report growth as advertisers continue to leverage the platform to market their products. We have created an interactive dashboard that illustrates our expectation from various divisions. You can modify the revenue and operating profit expectations for each division to see how the company’s earnings would be affected in Q4 2017.
Volumes To Offset Pricing Pressure
During this upcoming earnings announcement, we expect Google’s cost per click will continue to decline as most ad inventory is sold through Google’s programmatic platform, which includes the DoubleClick Bid Manager. These ads sold through the programmatic monetize at lower rates than ad clicks on Google.com. Furthermore, search ad revenues are also facing headwinds from changing the geographical mix, device mix, currency fluctuations and property mix. Nevertheless, search queries have increased steadily due to the growth in search queries from smartphones. As a result, search ad revenues have improved despite the decline in CPCs across both mobile and PCs.
The company has ventured into various over-the-top streaming services such as YouTube Red and YouTube TV for its YouTube platform. As a result, more than 1.3 billion monthly users are watching hundreds of millions of hours of videos every day on YouTube. As a result, we expect that revenues from YouTube will be a key revenue driver for the company in Q4.
The company’s Other Bets segment – which includes Fiber, Verily, Calico, Nest, self-driving cars, and other businesses – are unprofitable and continue to bleed cash. Over the past few quarters, Alphabet has scaled back some of its investments in these “moonshot” ventures to rein in costs and make these businesses accountable for their operations. Despite these efforts, we believe that the segment will continue to lose money in Q4.
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