Alphabet Forecasts Q4 EPS $2.62 on $104.75B Revenue and 34% Cloud Growth
Analysts expect GOOGL to report Q4 EPS of $2.62 on $104.75B revenue, up from $2.15 and $96.47B last year, supported by AI-powered Search and 34% YoY Google Cloud growth with a $155B backlog. Meanwhile, UBS’s Kim Forrest warns slowing ad revenue poses an existential threat to Alphabet’s market leadership.
1. AI-Driven ‘Existential Crisis’ for Alphabet
Veteran portfolio manager Kim Forrest warned that Alphabet faces an “existential crisis” if its advertising revenue falters in the face of rapid AI adoption. She noted that generative AI models could displace traditional search monetization within months rather than years, leaving Google vulnerable to competitors that integrate AI-driven interfaces more effectively. Forrest quantified the risk by pointing out that search ad sales—accounting for roughly 80% of Alphabet’s top line—could decline by up to 20% in a downturn, potentially shaving $15 billion off annual revenue if click-through rates drop by just 10%.
2. Broadcom Partnership Bolsters GOOG’s Chip Strategy
While Intel struggles with delays and shrinking margins despite a $9 billion subsidy, Broadcom has quietly emerged as Alphabet’s preferred ASIC partner for its Tensor Processing Units. In the latest quarter, Broadcom attributed 50% of its revenue to AI customers, delivering 24% year-over-year growth and a 40.8% operating margin. That close collaboration has helped Google scale its data-center AI deployments more cost-efficiently and positioned GOOG to challenge Nvidia’s GPU hegemony over the next two years.
3. Q4 Earnings: Growth Offsets Rising Costs
Analysts expect Alphabet’s fourth-quarter results to reflect strong AI-powered search and YouTube monetization, driving revenue growth north of 8% year-over-year. Google Cloud is forecast to expand by roughly 30%, supported by enterprise deals for Gemini AI integration. However, operating expenses are projected to rise by over 15% as GOOG ramps data-center capital expenditures and AI research headcount. The consensus view is that adjusted operating margin could compress by 200 basis points but remain above 25%, preserving free-cash-flow growth above 10%.
4. Magnificent Seven Leadership Continues
Alphabet capped 2025 as the best-performing stock within the Magnificent Seven basket, delivering a 65.2% gain that outpaced peers by more than 20 percentage points. With Alphabet representing over 15% of the Roundhill Magnificent Seven ETF’s allocation, its upcoming earnings report will be closely watched for signals on whether its AI investments can sustain this leadership. At least two of the Magnificent Seven will report this week, making Alphabet’s execution critical to broader market sentiment toward mega-cap technology names.