Quarterly Outlook
Upending the global order at blinding speed
John J. Hardy
Global Head of Macro Strategy
Global Head of Investment Strategy
Alphabet’s upcoming earnings report this Thursday is a critical moment for investors. Amid rising tensions from AI disruption, tariff uncertainties, and market volatility, Alphabet finds itself at a defining crossroads. Investors are rightly asking: Will Alphabet stand tall or wobble under pressure?
With Alphabet’s stock down 22% from recent highs, it's clear that investors are uneasy. Yet underneath the anxiety, Alphabet remains a financial powerhouse, on track to report USD 75.4 billion in revenue for the first quarter of 2025—a solid 11.5% annual growth rate—and earnings per share expected at USD 2.01, marking about 6% year-over-year growth. But beyond these numbers, investors must carefully gauge what Alphabet says—and just as importantly, what it doesn't.
Investors have always loved Alphabet’s core business—Google Search—because it seemed unbeatable, like a fortress with unscalable walls. But the rapid rise of OpenAI’s ChatGPT, Perplexity and other AI tools has suddenly made Google look vulnerable. Google still dominates search revenues, pulling in USD 54 billion last quarter alone, but ChatGPT, with around 800 million users and blistering innovation pace, has investors worried.
To put it metaphorically: Alphabet is like an ageing football champion—undisputed for a decade—now suddenly competing against an aggressive upcoming rival. The crowd (investors) are nervous. Alphabet management’s commentary on Thursday about how they're defending their territory through AI, especially with their own Gemini AI models, will either reassure or deepen investor concerns.
The AI revolution isn’t a sprint; it's a marathon. The winner will be the one best able to scale innovation into lasting profit. Alphabet isn't out of this race—but they need to prove they’re setting the right pace.
Away from the spotlight of search, Google Cloud is expanding impressively, growing revenues about 30% annually and nearing a $50 billion annual run-rate—driven by booming AI demand.
Yet recent moves by cloud leaders Amazon and Microsoft to pause or delay new data centre leases—citing economic concerns and potential oversupply—are flashing warning signals across the industry. This cautious shift suggests rising uncertainty about near-term cloud growth and profitability.
For Alphabet, this is a double-edged sword. A broader industry slowdown would threaten Google's ambitious cloud growth plans. However, if Alphabet presses ahead while competitors ease off, Google Cloud might gain valuable market share longer term.
Investors should carefully listen for management's guidance on Thursday: Will Alphabet tap the brakes on spending, or stay aggressive and risk higher short-term costs to seize potential long-term gains?
While Alphabet may not seem directly exposed to US-China tariffs, indirect effects could be substantial. Tariff-driven consumer weakness in global markets could crimp advertising revenues, particularly from Asia. Alphabet has traditionally weathered economic storms effectively, but this year might be different.
Investors need Alphabet management to address head-on how they're protecting profits from macro pressures. Are they confident enough to steer through the storm, or are they bracing for impact?
As I've reflected before: "Companies can't control the economic weather—but investors need reassurance they're equipped to navigate rough seas."
When Alphabet reports, it won't be just about past performance. The real story will be guidance for the future:
Management’s tone here will be crucial. Investors will hang on every word, looking for signals of confidence—or hints of caution.
Here are three simple, clear things you should watch for Thursday:
Alphabet faces genuine challenges—but challenges create opportunity. The Thursday earnings call will reveal whether Alphabet is reacting to these challenges or proactively shaping the future. For investors, this moment is like peering through a telescope: are you looking at a distant star fading slowly or at one whose light will shine brighter after this period of uncertainty?
Investing isn't about avoiding uncertainty—it's about managing it intelligently. Alphabet’s Q1 earnings report offers investors precisely that opportunity. So, stay alert this Thursday. The story Alphabet tells could set the course—not just for the next quarter—but perhaps for years to come.