Why Google’s ‘Other Revenues’ Are the Key to Alphabet’s Earnings

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In an incredibly packed week of earnings announcements, the upcoming report from Alphabet Inc. GOOGL should emerge as one of the technology sector’s most important bellwethers. The Google parent has its hands in nearly every corner of the tech world, so investors will want to pay close attention when it releases its Q3 report on Thursday afternoon.

Based on our current consensus estimates, we expect to see Alphabet post adjusted earnings of $10.12 per share and revenues of $25.67 billion. These results would represent year-over-year growth of 8% and 30%, respectively.

Significant litigation costs—in addition to increased spending on new technologies and markets—have cut into Alphabet’s bottom line in recent quarters. But the massive tech conglomerate is still witnessing growth thanks to the continued strength of its core search business and the explosion of several new products.

One of Alphabet’s most exciting growth catalysts is its new hardware line. Investors will remember that Alphabet debuted a new line of Google-branded hardware devices, including the Pixel phone and Google Home smart speaker, in October 2016. Alphabet lumps these products into its “Google other revenues” segment, which has emerged as one of its fastest-growing units.

But what can we expect from the Google other revenues category in the company’s upcoming earnings report? To answer this, we can turn to our exclusive non-financial metrics consensus estimate file.

The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

Our consensus estimate file is currently calling for Alphabet to report Google other revenues of $4.613 billion, up about 35.6% from the year-ago period. In the previous quarter, Google other revenues grew by 35.6% to hit $3.405 billion.

Better-than-expected Google other revenues would imply a strong holiday shopping season for the Pixel and Google Home. This would certainly be an encouraging sign for Alphabet’s new hardware efforts. The “Google other” category also includes the company’s Google Play Store and Google Cloud offerings, although we will likely not see the results broken down more specifically.

It is also worth noting that “Google other revenues” are separate from the mysterious “Other Bets” unit. Alphabet uses this segment to lump together its smaller projects, which typically do not generate much money.

Make sure to check back here for our full analysis of Alphabet’s actual results tomorrow!

Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!

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