AI Boosts Google’s Earnings: What to Expect?

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Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s upcoming second-quarter earnings report will showcase positive results, largely attributed to advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to disclose its earnings this Tuesday.

Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upward, attributing this increase to the integration of the Gemini AI into Google Cloud and enhanced AI Overviews in Google Search. They expressed optimism about the potential of these AI features to enhance user engagement in Search, despite some initial challenges in the deployment of AI Overviews, which faced criticism for inaccuracies. As a result, they raised their price target for Google’s stock from $200 to $206.

In April, Google reported a remarkable 60% rise in profits during the first quarter, driven in part by its AI initiatives. This impressive performance led to a spike in the company’s stock price, pushing its market capitalization beyond the $2 trillion milestone, placing it alongside industry giants like Apple, Microsoft, and Nvidia.

Google’s strong first-quarter results followed the launch of various new AI products in line with its Gemini offerings. At the Google I/O developer conference, it unveiled an advanced AI assistant capable of interacting through smart glasses, claiming its new Gemini AI is 20% faster than the latest ChatGPT.

While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews, suggesting they could benefit Search monetization over time, he acknowledged the significant positive impact of AI on Google Cloud. Ives anticipates a notable 27% increase in Cloud revenue compared to the previous year.

J.P. Morgan’s Doug Anmuth shared a similar positive outlook, labeling Google as one of the firm’s top tech investment picks alongside Uber and Amazon, noting optimism surrounding its Generative AI developments ahead of the second-quarter earnings report.

However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI is favorable for Google, it remains uncertain whether AI will contribute to sustained sales growth in the long run.

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