Google investors have big expectations after stock's sharpest quarterly rally in 20 years

Core Viewpoint - Alphabet is facing high expectations for its upcoming earnings report, following a significant stock price increase of 38% in Q3, marking its best quarterly performance in two decades, and an additional 11% rise in October, reaching a record high [1][2]. Financial Performance - Revenue growth has been stagnant in the low teens, with projections of 12% growth for the next year, leading investors to adjust their expectations after a period of faster growth prior to the 2022 slowdown [2]. - Wall Street anticipates revenue growth of 13%, estimating total revenue at $99.89 billion and earnings per share at $2.26 [7]. Competitive Landscape - The recent optimism around Alphabet is largely attributed to its position in the artificial intelligence (AI) sector, although its relative weakness in AI compared to its dominance in online advertising has been a significant factor in stock performance [2][5]. - The ruling in Google's search antitrust case, which allowed the company to retain its Chrome browser but required data sharing with competitors, has been a catalyst for stock price increases [3][15]. AI Developments - Google is heavily investing in its AI models and services, particularly the Gemini family, which is expected to drive growth in its cloud unit as businesses increasingly rely on AI technologies [5][10]. - Analysts have raised their price target for Alphabet, citing faster product velocity in Search, Cloud, and Waymo as key drivers of momentum [6]. Market Competition - The competitive landscape for AI is intensifying, with new entrants like OpenAI posing challenges to Google's search capabilities. ChatGPT currently holds 81% of the global AI chatbot market, with Google’s Gemini at 2.8% [9]. - Despite competitive risks, analysts believe that focusing on fundamentals and the upcoming rollout of Gemini 3 could positively influence investor sentiment towards Alphabet [14]. Regulatory Environment - The judge's ruling on the antitrust case requires Google to share certain search and user data with qualified competitors, which may benefit services like DuckDuckGo and Microsoft Bing [15][16]. - Analysts expect a modest impact on Google from these data-sharing requirements, as it does not have to share data with generative AI competitors like OpenAI [17].