Analysts from Wedbush, J.P. Morgan, and Bank of America predict strong second-quarter earnings for Google’s parent company, Alphabet, as the tech giant integrates advanced AI tools into its operations. Alphabet is poised to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, citing the integration of the Gemini AI platform into Google Cloud and the introduction of AI Overviews in Google Search as significant drivers for sales growth. They expressed optimism about the wider adoption of AI technologies across Google’s services, noting that these developments are likely to increase user engagement in the core Search business. Despite initial challenges with the rollout of AI Overviews, which garnered a mix of humor and criticism online due to errors in its outputs, the analysts have raised their price target for Google’s stock from $200 to $206.
In its previous earnings report for April, Google reported an impressive 60% profit increase for the first quarter, a feat attributed largely to its AI innovations. This surge in profitability contributed to a significant rise in the company’s stock price, enabling it to surpass a market capitalization of $2 trillion and join the ranks of technology giants like Apple, Microsoft, and Nvidia.
With a series of new AI product launches under its Gemini AI suite, Google has set ambitious goals. The highlights from its recent Google I/O developer conference included the introduction of a future AI assistant capable of interacting through smart glasses, alongside claims that the new Gemini AI outperforms the latest version of ChatGPT by 20%.
While Wedbush analyst Dan Ives expressed cautious optimism about AI Overviews, suggesting it could enhance Search monetization over time, he acknowledged that AI’s impact on Google Cloud revenue has already been notable. Consensus among analysts indicates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth also shared a positive outlook, placing Google among the top tech stocks alongside Uber and Amazon, and highlighting the encouraging developments in generative AI as a precursor to Alphabet’s second-quarter earnings results. However, Raymond James analyst Josh Beck cautioned that while the current AI momentum seems favorable for Google, it remains uncertain whether this will translate into sustained long-term sales growth.
This optimistic outlook for Google’s earnings reflects the increasing importance of AI technologies in driving revenue for the company, as it advances its capabilities and user engagement strategies. The focus on AI could pave the way for continued innovation and success for Alphabet in the coming quarters.