When Google-parent Alphabet reports first quarter earnings after the market close on Thursday, it'll be the first look at online advertising and cloud computing trends for big cap tech companies amid growing worries over the U.S. economy. Google stock has retreated 20% in 2025 heading into the earnings report.
Alphabet's internet search business is still top of mind for investors amid the rise of generative artificial intelligence. One key is the impact of "AI Overviews," a new format, on internet search advertising revenue.
Estimates have been coming down. Analysts predict Q1 search ad growth of 9% to $50.49 billion, slowing from 12% growth in the fourth quarter of 2024.
AI Competition Could Impact Google Stock
Google began deploying AI Overviews in the U.S. in mid-2024, with conversational summaries topping links for many search queries. The AI Overviews system uses Google's in-house Gemini AI model.
"AI search competition also remains front and center given the rapidly growing scale of OpenAI's ChatGPT and Google's more measured pace in disrupting its own search ecosystem," said JPMorgan analyst Doug Anmuth in a report.
"At Thursday's earnings we hope to get increased clarity on the monetization of AI Overviews and early feedback on AI mode," he added.
AI mode allows Google users to choose what search format they want.
Google is competing with OpenAI, Anthropic, Facebook-parent Meta Platforms and many others in building new foundation models. In March, Google unveiled its new artificial intelligence model, Gemini 2.5. Early reviews have been positive.
CFO Costing Cutting Views
RBC Capital analyst Brad Erickson said institutional investors have lowered expectations.
"We believe buy side is expecting a (2% to 3%) miss, respectively, relative to sell-side estimates of 9% search growth and 8% overall ad growth in Q1," he said in a report.
He added that Chief Financial Officer Anat Ashkenazi's comments on controlling costs will be key. "We'd expect the CFO's every word around operating expenditures to be closely followed, particularly around headcount," he added.
Meanwhile, President Donald Trump's tariff-based trade policies have sparked worries over a possible U.S. recession.
"We believe the Street has been lowering expectations as business sentiment has deteriorated," said Bank of America analyst Justin Post in a report. "An in-line Q1 would likely be viewed as a positive. However, a miss, even if macro-related, could fuel already elevated competitive/regulatory concerns."
Microsoft and Facebook-parent Meta Platforms report Q1 earnings on April 30 while Amazon.com follows on May 1.
Some analysts expect Google to announce a new share repurchase program. In April 2024, Alphabet authorized its first-ever dividend of 20 cents per share, as well as a new share repurchase. In 2024, Alphabet bought back $61.8 billion of its own stock.
Overall, analysts project first quarter EPS of $2.01, up 6%, with revenue expected to grow 11% to $89.2 billion. Also, Analysts expect cloud-computing revenue growth of 28% to $12.29 billion, slowing from 30% growth in the December quarter.
Meanwhile, YouTube ad revenue will rise nearly 11% to $8.96 billion, analysts predict.
Technical Ratings
Also, the Relative Strength Rating of Google stock currently stands at only 31 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an RS rating of 80 or better.
Google stock holds an Accumulation/Distribution Rating of D. That institutional ownership rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.
Alphabet stock holds an IBD Composite Rating of 75 out of a best possible 99. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
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Follow Reinhardt Krause on X, formerly Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
