Will Google Cloud Strength Aid Alphabet's (GOOGL) Q3 Earnings?

Alphabet’s GOOGL third-quarter 2022 results, scheduled to be released on Oct 25, are likely to reflect strength in its cloud arm, Google Cloud.

Google Cloud turned out to be the key catalyst for Alphabet’s growth on the back of its strengthening cloud service offerings.

GOOGL’s cloud offerings include Google Cloud Platform and Google Workspace, which are continuously gaining momentum in the booming cloud computing market. Google’s growing investments in infrastructure, security, data management, analytics and AI remain major positives.

Alphabet is consistently witnessing strong revenue growth generated by the underlined segment, which derives revenues from fees collected for Google Cloud Platform services and Google Workspace collaboration tools.

Revenues from the segment were $6.3 billion in second-quarter 2022. The figure accounted for 9% of total revenues and exhibited year-over-year growth of 35.6%.

For third-quarter 2022, the Zacks Consensus Estimate for Google Cloud revenues is pegged at $6.7 billion, suggesting growth of 34.9% from the prior-year quarter’s reported figure.

Click here to know how Alphabet’s overall third-quarter performance is likely to have been.

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Factors to Consider

Google’s strengthening efforts toward expanding its cloud services portfolio, data centers, availability zones and regions are likely to have helped it gain a plum share in the highly competitive cloud market.

In the third quarter, Alphabet opened a data center in Singapore, which marks its third such establishment in the country. The move expanded Google’s presence in Singapore and the Asia-Pacific (APAC) region.

Moreover, Alphabet’s growing momentum across regions like North America, Latin America, Europe and the APAC on the back of strengthening Google Cloud Platform and Google Workspace offerings, is expected to have driven its cloud revenues in the quarter under review.

Increasing traction among government agencies and public institutions on the back of the Google Public Sector launch is likely to have contributed well.

Additionally, GOOGL’s efforts in integrating data lakes, data warehouses, data governance and advanced machine learning into a single platform are expected to have bolstered its prospects in the data cloud market during the to-be-reported quarter.

Google’s deepening focus on providing a secure cloud infrastructure owing to its growing cybersecurity efforts might have been a positive.

Google completed the acquisition of Mandiant, a provider of cybersecurity services, in the third quarter. The buyout is expected to have strengthened Google’s cloud business and contributed well to Google Cloud revenues.

Zacks Rank & Stocks to Consider

Currently, Alphabet has a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Asure Software ASUR, Aspen Technology AZPN and Amdocs DOX, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Asure Software has lost 14% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 32.8%.

Aspen Technology has returned 62.4% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 18.2%.

Amdocs has gained 8.9% in the year-to-date period. The long-term earnings growth rate for DOX is currently projected at 11.5%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.