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While the firm thinks investor fears around search share loss and margin headwinds from AI are overblown, it mentioned that Alphabet has yet to launch products or provide a roadmap to placate the bears.
According to the firm, investors will focus on the strength of ad trends and the timing of cost-cutting measures. The 12,000-person reduction will not affect Alphabet’s profits until Q2, causing near-term margin uncertainty, according to Oppenheimer.
For Q1, the firm estimates (3%)/(7%)/28% for net core advertising/YouTube/GCP growth vs. Street’s (2%)/(4%)/29%. It estimates Services operating margin of 32.1%, below the Street’s 33.5%, EBITDA growth of (5%) year-over-year on a 48.4% margin vs. Street’s (7%) on a 46.5% margin, and GAAP EPS of $1.12 vs. Street’s $1.08.
For fiscal 2023, Oppenheimer estimates net core advertising/YouTube/GCP growth of 3%/4%/25% vs. Street’s 4%/3%/26%, respectively. The firm forecasts EBITDA growth of 8% year-over-year on a 48.6% margin vs. Street’s 5% estimate on a 47.0% margin, and GAAP EPS of $5.55 vs. Street’s $5.12.
