Alphabet earnings preview: Investors keeping an eye on cloud, ads, and AI

Alphabet (GOOG, GOOGL) will report its Q2 2023 earnings on Tuesday after the market closes.

Investors will be eyeing the Google parent company's cloud growth, ad revenues, and, of course, its AI efforts.

Here's what Wall Street analysts are expecting to see from Alphabet's key metrics, as compiled by Bloomberg:

Revenue: $72.75 billion expected

EPS: $1.32 expected

Google ad revenue: $57.45 billion expected

YouTube ad revenue: $7.41 billion expected

Google Cloud revenue: $7.83 billion expected

Operating income: $19.94 billion expected

Overall, expectations for Alphabet will be fairly muted in this cycle, wrote JPMorgan analyst Doug Anmuth on July 20 in a note to investors.

[Read more: Big Tech earnings: Everything you need to watch for]

"Sentiment is still somewhat muted, and AI will remain a controversial topic for investors, particularly whether GOOGL can drive incremental monetization through generative AI search (we think yes)," he wrote. "Accordingly, we believe the bar for GOOGL is lower than for other mega-cap techs. However, beyond revenue acceleration, 2H catalysts for GOOGL are less clear, and advances in the AI and cost improvement narratives could take multiple quarters to play out."

That revenue acceleration is most likely to appear in the company's ad revenue, which is expected to be on a mild upswing as the digital advertising slowdown of the last year starts to stabilize. Last quarter, Big Tech rival Meta (META) made the case that the digital ad slowdown was ending altogether.

Cloud revenue will also be key – in Q1 2023, Google Cloud turned profitable for the first time, with the division growing by 28%.

The Googleplex Google Headquarters with bikes in the foreground in Mountain View, CA, on December 29, 2016. (Getty Images)AI and regulators loom over Alphabet's long-term plansAI has been an overall tailwind in tech and one that's especially and inextricably linked to Alphabet.

Since 2022, Alphabet has been entrenched in an AI standoff with Microsoft (MSFT), which relaunched its Bing search engine after doubling down on its investment in ChatGPT-maker OpenAI. Though Google still has far and away more users than Bing, Microsoft has managed to get back in the game, facilitating questions from some analysts about Google's ability to innovate.

Google co-founder Sergey Brin reportedly has become increasingly involved as Alphabet has looked to step up its AI game.

Notably, Alphabet — and Big Tech at large — has also been in the crosshairs with regulators of late. For example, the leading European Union regulator, the European Commission, is interested in breaking up Alphabet's ad tech business. Alphabet is also in talks with EU regulators about setting up guardrails on AI. Additionally, in January, the US Department of Justice sued Google, alleging the company has a monopoly on online advertising.

Alphabet shares are up about 36% year to date.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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