Snap Inc. warned of a dissipating digital-ads market last week after Wall Street analysts cautioned about just such an issue, which puts an uncomfortable spotlight on Google.

When Google parent Alphabet Inc. GOOGL, -1.15% GOOG, -0.93% reports second-quarter earnings Tuesday, a chorus of Wall Street analysts expect it, too, to get dinged. Inflation, whispers of recession, the war in Ukraine and supply-chain constraints continue to bedevil the economy, and many believe it is prompting a pullback in advertising spending.

“We expect volatility in results and estimates in the near-term given the degree of current macro uncertainty and recession risk,” Stifel’s Scott Devitt said in reducing his price target on Google’s stock to $145 from $155 in a July 21 note.

“Given the sensitivity of advertising campaigns to the vicissitudes of the economy, we expect digital ad spending to come under pressure in this environment and Alphabet to be negatively impacted,” added Monness Crespi Hardt analyst Brian White on July 19.

In early July, Barclays’ Ross Sandler shaved his price target on Alphabet [before its 20-for-1 stock split] because of a “perfect storm” in digital advertising amid increased competition and structural headwinds.

“We think this cocktail of events is likely to generate the lowest growth rates for the sector in years,” Sandler said in a July 5 note. He expects digital ads sales to grow just 3% year-over-year.

NOW PLAYING: MarketBrief - Another Leg Lower

Still, Google and Facebook parent company Meta Platforms Inc. META, -2.22% remain the big fish in an embattled sector, and should weather the storm better than the likes of smaller competitors like Snap SNAP, -0.05%, Twitter Inc. TWTR, -1.73% and Pinterest Inc. PINS, -0.41%. Last week, Snap and Twitter announced desultory results because of flagging digital-ad sales.

Alphabet, Facebook and Amazon.com Inc. AMZN, -1.63% have gobbled up “over 100% of every incremental dollar in digital advertising” over the past few years, Sandler said, though TikTok is expected to grow to $12 billion in revenue from $4 billion in 2021, and Apple Inc. AAPL, -0.88% is estimated to generate around $7 billion in revenue.

What to expect

Earnings: Analysts on average expect Alphabet to report earnings of $1.27 a share, compared with $1.36 a share a year ago. Analysts were projecting $1.38 a share at the end of March. [The internet search giant’s 20-for-1 stock split took effect July 18, and prior-year results have been adjusted to take the split into account.]

Contributors to Estimize — a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others — are projecting earnings of $1.27 a share on average.

Revenue: Analysts on average expect Alphabet to report $69.9 billion in total second-quarter revenue and $57.7 billion after removing traffic-acquisition costs, compared with $50.95 billion ex-TAC a year ago. Estimize contributors also predict $57.7 billion on ex-TAC revenue.

Stock movement: Alphabet’s stock has declined 26% so far this year, while the S&P 500 index SPX, -0.25% has dipped 17%. Shares of Alphabet are down 10% since the company last announced quarterly results on April 26.

What analysts are saying

Google’s dominance in search — which continues to cause it headaches with regulators and lawmakers — and its diversified technology portfolio makes it less susceptible to digital-ad disruption, according to RBC Capital Markets analyst Brad Erickson, who rates the stock as outperform with a target price of $135.

“We’d expect the company to focus on AI driving new search products, YouTube shorts gaining relevance in front of monetization, and [Google Cloud Platform] product expansion as it looks to accelerate share gains,” Erickson wrote on July 19.

“We believe Alphabet is well-positioned to benefit from the long-term digital ad trend, participate in the continued shift of workloads to the cloud, and capitalize on the digital transformation movement,” analyst White said, while adding that he believes Alphabet will meet his second-quarter estimates for revenue ($69.12 billion) and EPS ($1.30). “However, the economy appears to be in a recession, regulatory headwinds persist, equity markets are in turmoil, and the geopolitical landscape is daunting.”