AI Boosts Google’s Earnings Outlook: What to Expect?

Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings as Alphabet prepares to release its earnings report on Tuesday.

Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and new AI features in Google Search as key factors in boosting sales. They expressed optimism about the potential impact of these AI integrations on the core Search business, even acknowledging some initial challenges with AI Overviews that garnered online ridicule for errors. Their price target for Google’s stock has been increased from $200 to $206.

In April, Google reported a remarkable 60% increase in profits for the first quarter, partially attributed to its AI developments, which also drove the stock price higher, pushing its market capitalization above $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.

Following extensive releases of new AI products within the Gemini AI framework, Google’s first-quarter success included highlights from its developer conference, Google I/O, where it announced an advanced AI assistant capable of interacting through smart glasses. Google claims that its Gemini AI operates 20% faster than the latest iteration of ChatGPT.

Wedbush analyst Dan Ives, while cautiously optimistic about AI Overviews, noted that they could eventually provide a boost for Search monetization. He also mentioned that AI is already contributing positively to Google Cloud, with expectations for a 27% revenue increase in that segment compared to the previous year.

J.P. Morgan analyst Doug Anmuth shared the optimistic perspective, identifying Google as one of the firm’s top tech investment picks alongside Uber and Amazon. He highlighted the encouraging progress in Generative AI leading up to Alphabet’s second-quarter earnings report.

However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative around Google’s AI, the long-term impact on sales remains uncertain.

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