Google (Alphabet) Inc. (NASDAQ: GOOGL) in 2021 had a blockbuster year when it comes to financial performance. Earnings per share (EPS) skyrocketed as revenue rose to more than a quarter trillion dollars annually, $257.6 billion to be exact, double the level of three years ago.
The key driver of this growth has been the rising demand for digital advertising space as more people have spent greater amounts of time online during the pandemic.
Investors will be watching to see if Google can maintain its strong momentum when it reports earnings on April 26, 2022, for Q1 FY 2022. Analysts are not optimistic. They expect the company’s earnings per share to decline for the first time in seven quarters. Revenue is expected to rise but at its slowest pace in six quarters.
Investors will also be focusing on revenue for Google Cloud, one of Google’s main business segments. Google Cloud offers tools for developers through a cloud platform as well as other workplace collaboration tools. Analysts expect Google Cloud revenue to expand but at its slowest quarterly pace in at least three years.
Alphabet’s shares have outperformed the broader market over the past year. The stock’s performance gap with the market gradually widened from around mid-May 2021 through to about mid-November. That gap has since narrowed considerably, although the stock is still outperforming. Shares of Alphabet have provided a total return of 6.2% over the past year, above the S&P 500’s total return of 3.3%.
Analysts expect Google’s financial performance to weaken considerably in Q1 FY 2022. EPS is expected to fall 2.4% YOY, which would be the first earnings decline since Q2 FY 2020. Revenue is expected to grow 23.3%, continuing a deceleration trend that began in the third quarter of FY 2021. For full-year FY 2022, analysts forecast EPS to rise 3.5%, which would be its slowest pace in at least five years. Annual revenue is expected to increase 17.7%, slowing considerably from last year’s pace
As mentioned above, investors will also be focused on Google Cloud revenue. Google Cloud is one of Alphabet’s primary business segments. The cloud segment provides developers with a highly scalable and reliable platform for building, testing, and deploying applications. It also offers workspace collaboration tools, including apps like Gmail, Docs, Drive, Calendar, Meet, and more. Revenue is generated through the collection of fees related to those services.
Google’s Google Cloud Revenue has grown rapidly over the past four years, more than tripling from $5.8 billion in FY 2018 to a total of $19.2 billion in FY 2021. In the second quarter of last year, Google Cloud Revenue rose 53.9% YOY, its fastest pace since the third quarter of FY 2019. It then slowed to a pace of 44.9% YOY in Q3. Growth remained relatively steady at a pace of 44.6% YOY in Q4 FY 2021. Analysts expect Google Cloud revenue to decelerate again, forecasting a pace of 41.9% YOY in Q1 FY 2022. That would be the slowest pace of growth in at least 14 quarters. For full-year FY 2022, analysts forecast that Google Cloud revenue will rise 38.4%, which would be the slowest pace in at least five years.
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