Google’s AI Boom: Earnings Outlook Sparks Analyst Upgrades

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Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in AI will enhance its second-quarter earnings report, which is set to be released after market close on Tuesday. Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search as key drivers of sales growth.

They noted, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite some early challenges with the AI Overviews tool, which initially faced criticism online for its inaccuracies. Post and Bansal have adjusted their price target for Google’s stock up from $200 to $206.

In its first-quarter report in April, Google reported a remarkable 60% increase in profits, fueled in part by its AI initiatives. This performance led to a notable rise in its stock price, elevating the company’s market capitalization to over $2 trillion, placing it in the same league as Apple, Microsoft, and Nvidia.

Google’s strong first-quarter results were bolstered by the launch of various new AI products associated with its Gemini AI framework. At the recent Google I/O developer conference, the company unveiled a vision for a universal AI assistant that can interact visually and verbally with users through smart glasses. Google claims that its latest version of Gemini AI operates 20% faster than the latest ChatGPT model.

While Wedbush analyst Dan Ives expressed some caution regarding the impact of AI Overviews, he acknowledged that it might support Search monetization in the future. He also highlighted that AI is already having a positive effect on Google Cloud, with expectations of a 27% revenue increase from the previous year.

Doug Anmuth from J.P. Morgan shared a similarly optimistic view, listing Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressing excitement about the advancements in generative AI ahead of Alphabet’s earnings report.

However, analyst Josh Beck from Raymond James cautioned that, despite the current positive outlook surrounding AI for Google, the long-term impact on sales remains uncertain.

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