Alphabet earnings: What to expect

All eyes on Wall Street will be looking to Google parent Alphabet (GOOGGOOGL) on Monday when the Mountain View, California-based tech giant reports second-quarter earnings after the markets close.

Heather Bellini, a Goldman Sachs analyst, estimates earnings per share of $2.23 from Alphabet on revenues of $32.1 billion. Bellini’s is one of the few updated estimates that factors in the record-setting $5.1 billion fine from EU antitrust regulators, who ruled on Wednesday that Google had abused its dominance by forcing device makers to install its search engine and Chrome browser on Android devices. Google, for its part, has said it plans to appeal the ruling.

A drop in the bucket for Alphabet

If the penalty ultimately stands, it’s a relatively small amount for Alphabet, which had $102.9 billion in cash, cash equivalents and marketable securities stashed away as of March.

UBS analyst Eric Sheridan does not expect the ruling, which imposes several restrictions on pre-installed Google apps, to significantly slow or deter the download and usage of many Google apps.

“In the Apple App Store, Google has 9 of the top 50 apps, despite no relationship with the underlying OS,” Sheridan pointed in a report out on Wednesday.

With that in mind, analysts will be looking closely at how Google executives address the penalty on its second-quarter earnings call, given CEO Sundar Pichai’s recent blog postcautioning the decision will “upset the careful balance” Google has struck with its popular Android OS. Pichai’s broad language sparked conversations among tech pundits and analysts that changes could be coming for device makers, third-party app makers and even possibly consumers.

Watch out for Amazon

Also worth a look: Google’s stance on the competitive front. In a note published on Friday, Piper Jaffray Senior Research Analyst Michael Olson wrote that he foresees strong, continued growth with Google’s so-called bread and butter — ads via search — but also pointed out Amazon as a growing competitor to watch.

In more recent years, Amazon (AMZN) has become more aggressive in building out its ads business, which generated nearly $2 billion in ad revenues during the first quarter — up 139% year-over-year. That remains a small amount versus Google’s own advertising-generated revenues, which amounted to $26.6 billion during the company’s own first quarter. But Amazon’s ad business is currently growing at a faster clip, fueled by aggressive sales efforts and the company’s vast troves of retail data.

“From a competitive standpoint, all eyes should be on Amazon as its product search impacts the use case of Google search due to advances in Amazon’s ad business, and as Alexa becomes a gateway to information, but there is room for Google search revenue to continue to grow, especially for intangible products/services that do not lend themselves as readily to ‘Amazonification’ (e.g. insurance),” Olson wrote.

That’s good news for Alphabet and Google — for now.

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