Alphabet Inc. GOOGL is scheduled to report first-quarter 2021 results on Apr 27. In the last reported quarter, it delivered an earnings surprise of 40.2%.

The stock outperformed the Zacks Consensus Estimate in three out of the trailing four quarters, with the average earnings surprise being 24.8%.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at $15.41 per share, implying growth of 56.1% from the year-ago reported figure.

The consensus mark for revenues is pegged at $42.23 billion, implying growth of 25.3% from the year-ago reported figure.

Alphabet Inc. Price and EPS Surprise

Alphabet Inc. price-eps-surprise | Alphabet Inc. Quote

Performance in the Last Reported Quarter

Alphabet reported fourth-quarter 2020 non-GAAP earnings of $22.30 per share, which surpassed the Zacks Consensus Estimate of $15.91. Earnings increased 36% sequentially and 45.3% year over year.

Net revenues of $46.43 billion also outpaced the Zacks Consensus Estimate by 5.3% driven by strength in the company’s search, cloud and YouTube businesses.

Let’s see how things have shaped up for this announcement.

E-commerce, Cloud Momentum & Other Key Catalysts

Markedly, as an unprecedented spike in demand has been seen in this sphere buoyed by the COVID-19 pandemic, Google has been making strong efforts to reinforce e-commerce presence.

Also, the company drove momentum across the advertising business with new features that include booking for services using Local Services ads by Google that are known for connecting customers to trustworthy service providers.

Alphabet’s advertising revenues bounced back in fourth-quarter 2020, with YouTube advertising revenues up 46% year over year to $6.9 billion.

The trend is expected to have continued in the to-be-reported quarter. Recovery in travel, recreation and automotive ads is expected to have led to improved digital advertising visibility in the quarter to be reported.

In addition, Google has been significantly gaining momentum in the highly-competitive cloud market over the last few quarters. During the quarter, it expanded the cloud service portfolio and data centers.

In this regard, Google Cloud expanded global footprint with new cloud regions. The expansion is expected to have bolstered the company’s cloud customer base and aided the performance of the cloud division that has become an integral part of the overall business.

The latest efforts are expected to have strengthened Google’s key offerings to individual and enterprise customers, thereby expanding top-line growth.

The company’s self-driving project, Waymo, has been steadily gaining momentum in the autonomous vehicle market. This is likely to have driven its top-line growth in the quarter under review.

Concerns

Alphabet’s search advertising business has been facing stiff competition from Amazon. Google Cloud has been trailing both Amazon AMZN and Microsoft MSFT in the cloud computing space. Increasing competition in both the markets might have hurt its top-line growth in the to-be-reported quarter.

In addition, increased spending on consumer gadgets, YouTube video app and cloud computing services is anticipated to have been a risk. Higher expenses are expected to get reflected in the company’s upcoming results.

Also, it has been facing persistent pressure from advertisers to tighten controls on the YouTube video service. Also, the company’s growing litigation issues and increasing expenses might have hurt profitability.

Earnings Whispers

Our proven model conclusively predicts an earnings beat for Alphabet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. And that is the case here.

Earnings ESP: The company has an Earnings ESP of +4.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Alphabet has a Zacks Rank #3.

Stock to Consider

Here’s a stock that has the right combination of elements to beat on earnings in the upcoming release.

Verizon Communications Inc. VZ has an Earnings ESP of +0.41% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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