Unlike most media companies, tech faces a higher bar this Q1 earnings season. And Alphabet is no exception.
Analysts and investors will be paying the closest attention to Alphabet’s largest revenue driver, Google Search. Specifically, management’s commentary on the pace of recovery for the travel feature through Google Search. Additionally, Google Maps and Waze are also expected to have seen a decent recovery trend as the world slowly moves toward reopening.
Given Alphabet’s exposure to the travel industry, it looks best poised among the Big Tech giants to benefit the most from a reopening economy. Analysts project Google Search grew 22% during the first quarter.
Furthermore, YouTube is largely anticipated to post strong performance during the quarter. YouTube stands to further benefit from ad dollars shifting away from linear TV toward connected TV, and recent growth in direct response advertising likely had a positive impact.
Subscription services such as YouTube Premium, YouTube Music and YouTube TV have allowed Alphabet to tap into a recurring revenue stream. With the ad market seeing quite the rebound since Q4, Google is well positioned to reap the additional benefits through both Search and YouTube. During the first quarter, YouTube’s ad revenue is expected to have grown 40% based on consensus estimates.
Perhaps a more underrated part of YouTube’s business is YouTube Gaming. Last year was a big year for YouTube Gaming, as folks hunkered indoors to social distance amid a global pandemic. In 2020, over 100 billion hours of gaming content was viewed on YouTube, with total daily livestreams jumping 45% in just the first half of this year. It was explosive growth, and thus the comparisons in Q1 will be tough.
Alphabet not only faces tough comparisons year-on-year, but let’s not forget about the ongoing fight with Congress regarding antitrust. The regulatory scrutiny has been a major overhang for Alphabet and its investors, and there is only more to come ahead. The Biden Administration is expected to be even tougher than its predecessor. So, while there is a strong bull case for Alphabet’s fundamental business, it’s important to factor in the regulatory challenges that could possibly upend the entire tech sector.
This is part of a series of Variety Intelligence Platform’s Q1 2021 earnings previews for the biggest tech and media companies. For a complete list of the companies VIP has analyzed in advance of the Q1 earnings season, read our most recently published special report, “Q1 Preview: 2021 Financial Outlook for Key Media & Tech Companies.”