Google Stock Braces for Q1 Earnings Amid Cloud Gains, Ad Risks

A Tough 2025 for Google - Shares Lag the S&P500

Going into earnings, Google’s share price is -19% YTD, and -25% since reporting its Q424 earnings. It’s been a tough environment for all the mega-cap US equity plays, but an unfavourable AdTech ruling and concerns around future ad spending from US and global corporates have seen Google underperform the S&P500 by 9ppt.

Despite the underperformance and the headwinds that have impacted the share price, there is a positive expectancy building from market players of strong future returns. Valuation is considered ‘cheap’ on 36x forward PE multiple, and its recent suite of product rollouts has been well received. One could also argue that the bar to beat expectations has been sufficiently lowered to the point that the risk to reward may favour bullish positioning into earnings.

Options Pricing Imply a -/+5.7% Move on Earnings

To quantify the expected movement in Google’s share on the day of reporting, we can see that options pricing implies a move on earnings of -/+5.7%. This falls in line with the average absolute move of -/+6% seen over the past 8 quarterly earnings reports. A 5.7% move – if realised – would be sufficient to get the short-term traders interested in the stock, and many focus on its recent trading range of $164 to $140, and whether earnings can be the trigger for a re-test and potential break of either range levels.

Given the uncertainty that remains from the evolving world of tariffs and economics, we may not get the level of explicit guidance from management that many would like. Google Advertising remains challenged by the impact that a US and global economic downturn may have on planned corporate advertising spend – and with its Advertising division expected to contribute around 75% to group revenue, revenue from Google Search, and YouTube matters to investors.

There has also been a strong focus on a highly competitive landscape for Search, notably with the increased rollout of alternative AI search capabilities. That said, Google’s recent release of Gemini 2.5 Pro has been well received by users and has pleased shareholders, with the announcements of other products and innovations going some way to allay fears of rising competition.

While the options market implies a near -/+6% move on the day of earnings, one questions if that implied move is exacerbated by the fact that most of the US companies who have reported (in this earnings season) have seen larger 1-day % moves than what was implied in options pricing. Plus, with Google reporting earnings for the Jan-March period and with its operating environment having changed so radically since the start of April, one also questions if the Q125 earnings offer any real useful intel to market players.

Investors live in the future, and with management unlikely to provide strong guidance and the necessary visibility for investors to model future free cashflow, revenue and margins, one could argue that a -/+5.7% move seems a tad optimistic.  

Google’s Capex Plans Set to Influence Nvidia’s Share Price?

The irony of the situation could well be that Google’s earnings report could have just as much of an influence on the share prices of other US equities – notably, Nvidia’s shareholders will keenly eyeing Google’s numbers for conviction on its ongoing push for GenAI infrastructure. Here, Google should almost certainly re-affirm its capex plans for CY2025 at $75b, but its guidance on capex intentions for CY2026 is arguably the key factor, given increased concerns around the durability of capex spending from the US hyperscaler businesses (Microsoft, Amazon, Meta and Google).

Expectations for Google’s Earnings: The Numbers That Matter

While I say that the Q1 2025 earnings may be stale, the numbers could still move the price if we see a big beat/miss. We can see from the screenshot the consensus expectations for its key earnings metrics for the current report quarter (Q12025), as well as expectations for the upcoming quarter (Q2 2025).

Breaking it down into the core themes that investors will be eyeing that could catalysis the share price, there will be additional focus on:

• The trajectory of its Cloud division, with analysts forecasting 3% revenue growth q/q in Q125 and 7% q/q in Q225. Google Cloud Platform looks set to benefit from the Wiz acquisition, and investors will look for plans for a continued build-out of its cloud capabilities.
• The adoption and potential take-up of Gen AI – notably on AI Mode which is seen by some as having a strong future in search.
• It’s ongoing cost reduction and its efficiency drive – how will this impact margins going forward?
• Commentary on the impact of the DoJ case
• The level of cash flow is key, with expectations building that Google have the capabilities to guide towards a new share buy-back plan.

Summary

Google has underperformed the S&P500 in 2025, and while visibility on its operating environment remains challenged, the pipeline for product innovation looks compelling and many will be hoping that the earnings report will offer enough insight to have confidence in its future sales and earnings assumptions – if so, Google may be in for a better run ahead.