Alphabet set to report Q3 results amid rising debt and suspended buybacks
Alphabet is scheduled to release its third-quarter earnings, with analysts noting strong revenue growth but a decline in free cash flow and a significant increase in long-term debt.
Alphabet (NASDAQ: GOOGL) will announce its third-quarter earnings after the market closes. The company reported second-quarter revenue of $119.80 billion, a 24.2% year-over-year increase that beat the $116.91 billion forecast, and earnings per share of $9.11, driven by a $99.03 billion gain on equity securities. Operating margin rose two points to 34%.
Despite the revenue beat, the cash flow statement showed a free cash flow deficit of $5.86 billion, while long-term debt more than doubled from $46.5 billion to $98.2 billion. Alphabet also suspended its share-buyback program. CEO Sundar Pichai described the quarter as “an amazing quarter.”
Analysts project third-quarter revenue of $127.83 billion, a 24.9% increase from the prior year, and earnings per share of $3.00. Forecasts suggest that while revenue growth may continue at a similar pace, earnings growth could be constrained by higher depreciation and capital spending. The company’s capital-expenditure rose 100.1% in the second quarter, prompting investors to watch for updates on the full-year spending plan and any improvement in free cash flow.
Key areas of focus for the earnings release include cloud services growth, which has accelerated across recent quarters, the performance of the Gemini app that now reports 950 million monthly users, and the impact of paused buybacks alongside a $40 billion at-the-market stock sale program on shareholder dilution.
Alphabet’s stock has been volatile around earnings releases, with a 7.13% drop on the day of the previous quarter’s results followed by a 5.03% gain over the subsequent week. The shares are up 3.62% year-to-date, trading around $323.69.