Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) is scheduled to release and discuss its third-quarter financial result on Thursday, October 16 at 1:30 P.M. Pacific Time.

Analysts at Bernstein Research believed that investors are still primarily focused on the company’s revenue growth sustainability, the trajectory of its operating expenses, margin and capex.

Third-quarter earnings and revenue estimate

According to Bernstein Research analysts Carlos Kijner and Peter Paskhaver, their third-quarter revenue and EBITDA estimates for Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) are below consensus.

Google Inc Earnings Preview - Q3

The analysts estimated that Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) will report $16.53 billion revenue, below the $16.60 billion consensus estimate. They expect the search engine giant to deliver non-GAAP earnings of $6.63 per share compared with the consensus estimate of $6.55 per share.

Kijner and Paskhaver explained that a large portion of their estimate (below consensus) was “due to F/X headwinds.” They added, “ We believe the key metrics to watch are the evolution of Google Sites growth, the potential re-acceleration of Network revenues, sequential headcount additions and any indications of a normalization of capex intensity.”

Google Sites, Network revenue expected to grow

The analysts expected Google Sites’ revenue will grow 22.3% year-over-year on an FX neutral basis. Kijner and Paskhaver believed Google Sites would benefit from a 19.8% and 39% increase in search advertising revenue, respectively (YoY FX-neutral).

On the other hand, Kijner and Paskhaver expected Google Network’s revenue to re-accelerate ( around 9%) in the third-quarter. They expected most expenses (ex-TAC) are fixed or semi-fixed. According to them, “The incremental gross profits associated with the re-acceleration of Google Network will have a disproportionate impact on margins.”

Google’s other revenues

The analysts believed that the other revenues of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) are poised to grow at high double-digit rates over the next few years. According to them, Google Play will serve as a strong growth driver. Google’s other revenues are expected to increase 47% YoY in the third-quarter.

Margin and headcount

Kijner and Paskhave noted that the gross profit margins of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) declined over the past two years. According to them, the margins decline was caused by other cost of revenues (businesses with materials costs such as YouTube and Google Play).

The analysts emphasized that the decline was due to a” mix shift and not a fundamental deterioration of Google’s business.” They added, ‘As a result of this mix shift and decreasing gross profit margin, the evolution of Google’s operating expenses becomes increasingly important.”

Kijner and Paskhaver also noted that the headcount of Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) increased sequentially by 2,414 during the second quarter. According to them, its headcount climbed 21% YoY, which was likely organic and a sign that the company is willing to increase its headcount in the medium-term.

The analysts said the Google’s headcount acceleration if sustained for multiple quarters poses risk to their thesis and requires the attention of investors.