NEW YORK, Oct. 14, 2024 Investment firm Baird believes Google’s (GOOG, Financial) operating income and earnings per share (EPS) estimates will likely be at risk due to rising capital expenditures (capex) for data center and infrastructure expansion. Analyst Colin Sebastian cautioned that these operational expenses are likely to weigh down the company’s Q4 results, which are set to be reported later in the month.
However, Google’s shares rose 1.2% in midday trading Monday despite the relatively concerning comments from Baird. Sebastian noted that the ramp-up in capex for infrastructure could potentially lead to lower-than-expected GAAP operating margins for Q4 and 2025. He warned of a potential “sell-side reset” in consensus forecasts leading to Q4. Additionally, analysts expect Alphabet, Google’s parent company, to post earnings of $1.84 per share on $86.23 billion in revenue when it reports its operating results later this year.
On a more positive note, though, Sebastian acknowledged that revenue gains from AI and generative AI products and services could offset those cost pressures. Baird maintains an Outperform rating on Alphabet with a $200 price target, signaling sustained confidence in the tech giant’s growth prospects.
This article first appeared on GuruFocus.
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