Updated from 9:08 a.m. with additional information.
When Alphabet (GOOGL) - Get Alphabet Inc. Class A Report reports fourth-quarter earnings after the close Thursday, Ruth Porat can answer a number of burning questions that investors likely have. Shares of Alphabet are up about 8% already this year.
Wall Street expects earnings of $9.64 per share, according to FactSet, but analysts and investors will look for color on issues ranging from the health of Google's bedrock mobile search business to new developments such as the high-end Pixel phone and YouTube's ambitions in the online content wars.
Here's a look at some of the top concerns:
1. Will mobile search continue to drive growth?
Mobile search has been "the first among equals, the driver of their top line growth" Wedbush analyst James Dix. Google has driven growth by increasing the ad space on search result pages. But topping the numbers is becoming increasingly challenging. "They are starting to come against some pretty tough comparisons," Dix said.
2. How has the ad market performed since the election?
Google will be one of the first big digital advertising companies to report since the election. "Some people have been wondering has the overall sentiment of people changed at all since the election and [Google is] a decent barometer of that," Dix said.
3. Will YouTube join the original content arms race with Netflix (NFLX) - Get Netflix, Inc. Report and Amazon (AMZN) - Get Amazon.com, Inc. Report , and/or launch a streaming service to compete with AT&T's (T) - Get AT&T Inc. Report DirecTV Now and others?
While Netflix and Amazon are about selling subscriptions, YouTube is a video advertising power. But Google hasn't yet made the kind of investments in high-end content that appeal to advertisers. "That's what draws big marketers to put ad budgets into TV," Dix said. "It's not just that somebody is staring at a screen with a moving image on it, it's the context of that image."
On another front, Google is reportedly exploring a streaming service called YouTube Unplugged that would bundle cable stations in an online service.
4. Can Google catch Amazon and Microsoft in the cloud?
Google's public cloud service is in third place behind Amazon.com's (AMZN) - Get Amazon.com, Inc. Report Amazon Web Services and Microsoft's (MSFT) - Get Microsoft Corporation Report Azure. This year, the company plans to open regional centers in Sydney, Australia; Sao Paulo,Brazil; Frankfurt, Germany; Mumbai, India; Singapore; London; Hamina, Finland; and Northern Virginia. How aggressively is Google planning to take on Amazon and Microsoft?
5. What's up with Waymo?
Alphabet made its self driving car unit an independent unit called Waymo in December. The business got some press in January when it debuted the self-driving Pacifica Hybrid minivans developed in partnership with Fiat Chrysler (FCAU) - Get Stellantis N.V. Report at the Detroit Auto Show. It will likely be years before self-driving cars become a reality for consumers, and it's still too early for Waymo to show financial gains. But setting up Waymo as a separate entity reflects a sharper focus on the business, and Alphabet will likely have more news on it even if it doesn't have financial gains yet.
6. How is the Pixel phone doing?
Google launched the Pixel phone during the fourth quarter. Deutsche Bank analyst Lloyd Walmsley estimated in a report released on Wednesday that each 1% of smart phone market share the Pixel gains (at a 15% operating margin) could be worth $20 a share to Alphabet. The device could also become a showcase for Google's Virtual Assistant, which also powers Google Home, he suggested.
7. What is the outlook for Trump's tax policies?
As the Trump team looks to rework the tax code, Alphabet has a lot at stake. Moody's estimates that Alphabet ended the year with $49 billion in overseas cash, and that it would benefit significantly from a tax holiday allowing corporations to repatriate cash at a discounted tax rate.
Trump has also spoken of lowering the U.S. corporate tax rate. Alphabet already pays a comparably slim tax bill because much of its revenues come in overseas countries with lower tax rates. At the end of the third quarter, Alphabet put its effective tax rate at 16.3%. As a result, Alphabet would benefit less than companies paying higher rates, Dix noted.