Should You Buy, Hold, or Sell Alphabet Stock Ahead of Q1 Earnings?

Core Viewpoint - Alphabet Inc. is expected to report strong first-quarter earnings driven by artificial intelligence (AI) growth, despite a 20% decline in shares this year due to market pressures and competition in the AI sector [1][4]. Group 1: Earnings Expectations - Alphabet's Q1 revenues are projected at $75.53 billion, reflecting an 11.7% increase from the previous year, with earnings per share (EPS) expected to reach $2.01, surpassing last year's $1.89 [4]. - The company has historically delivered a positive trailing four-quarter earnings surprise of 11.6%, indicating potential for earnings growth in the upcoming report [5]. Group 2: AI Integration and Growth - The Google Gemini AI is integrated across Alphabet's platforms, reaching over 2 billion users, with a goal of 500 million users by year-end through a partnership with Samsung [2]. - Anticipated high demand for AI cloud services is expected to significantly boost Google Cloud revenues, which are projected to grow 30% annually until 2032 [4]. Group 3: Competitive Landscape and Challenges - Alphabet faces challenges from tariffs and a weakening advertising business, which may impact AI services revenues if companies reduce spending due to tariff pressures [5]. - The rise of large language models (LLMs) like ChatGPT could decrease demand for YouTube and Google, potentially affecting ad revenues [6]. - Increased competition in the advertising market from companies like Amazon could disrupt Alphabet's ad business growth [8]. Group 4: Valuation and Investment Considerations - Alphabet is currently trading at a price-to-earnings (P/E) ratio of 17.39, which is lower than the Internet - Services industry's forward earnings multiple of 17.72, suggesting it may be undervalued compared to peers [10]. - Despite the attractive valuation, caution is advised due to potential long-term growth impediments from competition and tariff issues, suggesting that waiting for earnings updates may be prudent before making new investments [11].