Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is slated to report its fourth-quarter and full-year 2019 results after the market close on Monday, Feb. 3. The Google parent and search engine leader is going into its report on a mixed note. Last quarter, it missed Wall Street's earnings expectation, but it easily beat the consensus estimate in the second quarter. 

Like many of the large tech stocks, Alphabet shot out of the gate in 2020. Both Class A (GOOGL) and Class C (GOOG) shares are up more than 10% through Friday, Jan. 17, versus the S&P 500's 3.1% return. This strong performance is especially welcomed by investors, given that the stock slightly underperformed the market last year: In 2019, Class A and C shares gained 28.2% and 29.1%, respectively, versus the S&P 500's 31.5% return. 

Here's what to watch in Alphabet's upcoming report, its first quarterly report since Sundar Pichai took the CEO reins from company co-founder Larry Page in early December.

Glass-walled, multistory Googleplex with "Google" written on side of building and a couple bikes in multicolor bike racks in foreground

Image source: Alphabet.

Key quarterly numbers

Here are the tech behemoth's year-ago results and Wall Street's estimates to use as benchmarks. The company doesn't provide guidance.

Metric Q4 2018 Result Wall Street's Q4 2019 Consensus Estimate Projected Change (Decline)

Revenue

$39.28 billion

$46.93 billion

19.5%

Adjusted earnings per share (EPS)

$12.77

$12.55

(1.7%) 

Data sources: Alphabet and Yahoo! Finance. Consensus estimates as of Jan. 17.

CFO Ruth Porat said on last quarter's earnings call that "relative to the fourth quarter of last year, we expect continued FX [foreign exchange] headwinds again in the fourth quarter of 2019." She reminded investors that these headwinds "affect both revenues and operating income given the majority of our expenses are in the U.S."

Alphabet's revenue growth has outpaced its percentage change in profit for some time because the company is investing to support long-term growth. Investors can expect this dynamic to continue.

Segment results

For context, here are the third quarter's results by segment:

Segment Q3 2019 Revenue Growth (YOY) Q3 2019 Operating Income (Loss) Growth (YOY)

Google

$40.3 billion

20%

$10.9 billion

14%

"Other bets" (formerly "Moonshots")

$155 million

6%

($941 million)

Loss widened 29%

Total 

$40.5 billion

20%

$9.2 billion*

6.4%*

Data sources: Alphabet and Yahoo! Finance. YOY = year over year. *Total company operating income. Operating income was negatively affected by a $554 million charge from a legal settlement with France over the company's tax practices. Moreover, the company agreed to pay about $510 million in back taxes to the country. 

In constant currency, revenue grew 22% year over year, the same as in the second quarter and up from the first quarter's 19%. Within Google, revenue breakdown was as follows:

  • Google properties ("sites"): a 19% year-over-year increase to $28.6 billion.
  • Google network members' properties: an 8% rise to $5.3 billion.
  • Total Google advertising (above two categories): a 17% increase to $33.9 billion, driven by mobile search and YouTube. 
  • Google "other revenue": a 39% jump to $6.4 billion, driven by strong growth in Cloud. The growth rate was roughly the same as in the second quarter, when it was 40%.

Google: Ad revenue growth

As always, investors should mainly focus on the Google segment, since this is the company's largest segment by revenue by far and includes the company's core advertising business. Last quarter's ad-sales growth of 17% year over year represented a slight acceleration from the second quarter's 16% and first quarter's 15%, but prior to this recent slight acceleration, this metric had been decelerating on a sequential basis. It was 20% in both the third and fourth quarters of 2018.

"Other bets": Waymo update

Management will likely provide an update on the earnings call about the activities of the company's self-driving vehicle business, Waymo, which is part of the "other bets" segment. On last quarter's earnings call, Porat gave this update:

At Waymo, we're extending fully driverless opportunities on a small scale to participants in our early rider program in Metro Phoenix. We're also testing long-haul truck driving on Arizona freeways. And we're continuing to test Waymo vehicles in various geographies, the newest of which is ... southern Florida. In addition, we have begun 3D mapping in Los Angeles.

The Phoenix service launched on a limited basis in December 2018, and marked the start of Waymo being monetized.