Google faced 2nd-quarter challenges but street confident earnings unaffected

John Krafcik, CEO of
Waymo.
Brendan
McDermid/Reuters

• Google faced an antitrust investigation in Europe and
  saw thousands of employees protest the company’s AI work with
  the military and even saw a woman shoot up YouTube’s
  headquarters during the second quarter.
• Wall Street analysts expect that none of it harmed the
  company’s financial performance.
• Analysts expect the company to report net revenue of to
  $25.6 billion,  a 22 percent increase from the same period
  last year. 

The way Wall Street analysts see things, Google has shrugged off
most of the significant hurdles faced in the past quarter.

Alphabet
Inc., Google’s parent company, is due to report
second-quarter earnings after the bell on Monday.

Excluding traffic acquisition costs (TAC), a poll of analysts
showed that on average most are expecting Google to report
revenue of $25.6 billion, a 22-percent increase from last year,
according to
TheStreet.com. On a GAAP basis, analysts expect the company’s
earnings per share to come in at around $9.66.

This would indicate that the
European Commission’s antitrust investigation into Google’s
business practices, and an employee protest over Google’s
agreement to
supply artificial intelligence tools to the military, and
even a
shooting at YouTube’s headquarters, haven’t slowed down the
Google colossus one bit. Google is one of the world’s most
influential companies and operates a highly diverse group of
businesses across the globe. 

One possible reason for that is Google did a good job during the
quarter of selling the idea that some of the company’s side bets
are on track to pay off big.

Management wowed journalists and developers with
demonstrations of Duplex, the new iteration of Google
Assistant that can speak and understand natural language well
enough to converse briefly with humans. So far, all the
technology can do little more than book restaurant reservations
but computer systems that can speak is the scifi-esque stuff that
captures imaginations and drives share prices up.

The same goes for Waymo, Alphabet’s self-driving car company.
Ahead of earnings on Monday, Morgan Stanley analysts released yet
another glowing report on Waymo’s progress.

“Waymo announced it has now logged 8 million miles on public
roads, up from 5 million in February,” wrote Brian Nowak, a
Morgan Stanley analyst. “The addition of 3 million real-world
miles in just 5 months represents a significant step change in
Waymo’s pace of testing…since it took 8 years to drive its
first 3 million miles and 9 months to drive another 2 million.
Said another way, Waymo’s pace of real world data gathering has
(tripled).”

This supports the thesis that Google holds a big lead in the
emerging autonomous transportation sector. Two weeks ago, RBC
Capital analyst Mark Mahaney wrote that
he estimates Waymo stands to generate as much as $35 billion
in operating profits by the year 2030. 

Still, Waymo hasn’t even launch commercial operations. That isn’t
expected to start until later this year, with a limited rollout
in Phoenix.  Innovative technology like Waymo and Duplex may
not be contributing to the bottom line yet, but it hasn’t stopped
investors from bidding up Alphabet shares, which are up 17% in
the past three months. 

Get the latest Google stock price here.