Google parent company Alphabet (GOOG -1.55%) (GOOGL -1.58%) is set to report results for its fourth quarter of 2016 on Thursday, Jan. 26. Before the numbers for the quarter are released, here's a broad overview of some areas to watch.

Google offices. Image souce: Google.

Revenue and EPS

The pressure is certainly on for Alphabet's fourth quarter, especially after the company's expectation-beating quarter before it. For Alphabet's third quarter, both the company's revenue and earnings per share (EPS) exceeded expectations. Revenue and non-GAAP (non-generally accepted accounting principles) EPS was $22.5 billion and $9.06, respectively, up significantly from $18.7 billion and $7.35, respectively, in the year-ago quarter. Analysts, on average, expected third-quarter revenue and non-GAAP EPS of $22.1 billion and $8.63.

Going into Alphabet's fourth quarter, analysts expect robust growth to continue, albeit not as sharply. On average, analysts expect fourth-quarter revenue and EPS of $25.1 billion and $9.63, up 18% and 11%, respectively, year over year.


Q3 YOY Growth

Q3 YOY Growth Implied by Consensus Analyst Estimate







There's merit to analysts' conservatism, particularly since Alphabet CFO Ruth Porat went out of her way during the company's third-quarter earnings call to remind analysts that the company will be up against tough year-ago revenue comparisons in the fourth quarter.

Paid clicks and cost-per-clicks

One of the reasons why Alphabet outperformed expectations in Q3 was because of its big increase in paid clicks, or the total number of clicks for which advertisers paid Google. Aggregate paid clicks in Q3 were up 9% sequentially and 33% year over year. Notably, some of the benefits from such a large increase in paid clicks was offset by 5% and 11% decreases in cost-per-click, or the amount advertisers pay Alphabet for each click, but the outsized gain in paid clicks was significant enough to help drive significant revenue growth.

Investors should look for look for similar trends in Alphabet's paid clicks and cost-per-clicks in Q4. If the trends diverge in an unexpected direction, investors may want to look for an explanation from management during the company's fourth-quarter earnings call.

New Google products

Also, after launching some new Google-branded hardware, investors also may want to look for some updates from management on how these products are faring. While the new products still almost certainly will be immaterial to overall results, a promising start for the new devices could signal bigger opportunity ahead.

Google Home. Image source: Google.

In October, Alphabet launched two new significant products: a Google Pixel smartphone and a Google Home artificial intelligence-enabled smart speaker. The Pixel quickly sold out online, and Google Home ended up selling out in many stores during the holidays -- evidence of the high demand for these new products. Indeed, in a statement to 9to5Google, a Google spokesperson specifically said demand was to blame for the Pixel selling out:

We're thrilled to see the excitement for our new Pixel phones, and frankly pre-order demand has exceeded our expectations. We're working to restock our inventory as soon as possible.

While Alphabet hasn't yet proven it can build a sustainable and meaningful hardware business, maybe the Pixel smartphone and Google Home could finally change this.

Alphabet will report its fourth-quarter results immediately after market close on Jan. 26. Management will host a conference call to discuss the results at 4:30 p.m. EST.