Alphabet (GOOG, GOOGL) is set to report Q1 results tonight after the close with a conference call to follow at 4:30pm ET. GOOG reported Q4 results at 4:01pm.

Current consensus is looking for EPS of $7.96 on Revenue of $20.38 bln.

KEY METRICS:

  • Revenue Growth- Q4 saw 18% which was a marked improvement from the prior three quarters (13.0%, 11.1%, 11.9%); Expectations are for another 18% y/y increase.
  • Non-GAAP Operating Margin- Increased to 32% in Q4. Google's Core margins were up 320 bps to 47%.
  • Aggregate paid Clicks- Q4 increased 22% q/q on Google websites.
  • Q4 Aggregate cost-per-click- Q4 was down 5% q/q in Q4.

Q4 Recap

GOOGL reported Q4 (Dec) earnings of $8.67 per share, $0.58 better than the Capital IQ Consensus of $8.09. Revenues rose 18.5% year/year to $21.33 bln vs the $20.76 bln Capital IQ Consensus.

Aggregate paid clicks- Q4 +31%; Q3 +23%.

  • Paid Clicks on Google websites- Q4 +40%; Q3 +35%.
  • Paid clicks on member sites- Q4 +2%; Q3 -5%.

Aggregate cost per click- Q4 -13%; Q3 -11%.

  • CPC on Google sites- Q4 -16%; Q3 -16%.
  • CPC on member sites- Q4 -8%; Q3 -4%.

Revenue Segments

  • Google Website revenue +20% y/y
  • Google Network Member websites +7% y/y
  • Google Advertising +17% y/y
  • Google Other Revenues +24% y/y
  • Operating Expense as % of revenue 36% compared to 37% in prior year
  • Free Cash Flow- $4.31 bln compared to $2.81 bln in prior year
  • TAC As a % of revenue- 21% compared to 22% in prior year.

Alphabet misses by $0.46, reports revs in-line

Reports Q1 (Mar) earnings of $7.50 per share, $0.46 worse than the Capital IQ Consensus of $7.96; revenues rose 17.4% year/year to $20.26 bln vs the $20.38 bln Capital IQ Consensus

Revenue Segments

  • Google Websites +20% y/y
  • Google Network Members' Websites 3%
  • Advertising Revenues +16% y/y
  • Google other revenues +24% y/y
  • Q1 Other Bets Revenue $166 mln; Operating Loss ($802) mln
  • Paid Clicks and Cost Per Clicks
    • Aggregate paid clicks- Q1 +29%;Q4 +31%; Q3 +23%.
      • Paid Clicks on Google websites- Q1 +38%; Q4 +40%; Q3 +35%.
      • Paid clicks on member sites- Q1 +2%; Q4 +2%; Q3 -5%.
    • Aggregate cost per click- Q1 -9%; Q4 -13%; Q3 -11%
      • CPC on Google sites- Q1 -12%; Q4 -16%; Q3 -16%.
  • CPC on member sites- Q1 -8%; Q4 -8%; Q3 -4%.
  • Q1 Free Cash Flow $5.23 bln
  • Q1 Effective Tax Rate 18%

It looks like expectations are growing as margins are contracting. This is not a good scenario for a growth company. The longer this goes the more likely the old google days are over.