Alphabet (NASDAQ:GOOGL) is set to report its second-quarter 2024 results on Tuesday, July 23, and Wedbush analysts are optimistic about the company's performance.
"We think the setup remains positive heading into 2Q results," they noted, emphasizing strong indicators from their ad survey and agency feedback that suggest continued robustness in Google Search.
In light of this, Wedbush has increased its Google Search growth estimate for Q2 from 12.0% to 12.8%.
They now project Google Search revenue of $48.1 billion, up from the previous estimate of $47.7 billion. This revised estimate is approximately 1% higher than the consensus.
Overall, Wedbush expects Alphabet's consolidated Q2 revenue to grow by 13.1% year-over-year, slightly surpassing the consensus expectation of 12.8% growth. Their operating income estimate for the quarter is also about 2% above the Street's predictions.
Wedbush anticipates continued operating margin expansion, expecting it to reach 31.7%, compared to the consensus of 31.1%. They attribute this to ongoing cost controls.
The analysts acknowledge that while there is always a risk of negative surprises related to spending, particularly for megacap internet companies like Alphabet, the likelihood seems low this quarter.
"Expectations for near-term CapEx spending have caught up to reality in our view," they stated, pointing out that the consensus 2024 CapEx estimate has increased by about 33% since the start of the year.
Wedbush maintains its Outperform rating on Alphabet with a $205 target price. Ahead of the report, they are focusing on three key areas: operating expense and CapEx growth related to AI investments, second-half advertising growth as comparisons become more challenging, and the ongoing monetization of AI services within the cloud unit.
Overall, Wedbush sees a strong performance from Google Search as a significant positive driver for Alphabet's upcoming results.