Google’s AI Boom: What to Expect in Q2 Earnings?

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Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively influence its second-quarter earnings, with parent company Alphabet set to release its earnings report after the market closes on Tuesday.

Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of the Gemini AI technology into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They remain optimistic about the company’s expanding AI capabilities, believing that enhancements in AI overviews will lead to greater engagement with its core Search business, despite a rocky start when the tool faced criticism for generating inaccuracies. Consequently, they raised their price target for Google’s stock from $200 to $206.

In its first-quarter report, Google noted a remarkable 60% increase in profits, attributed in part to AI advancements. This financial success contributed to a rise in the company’s stock price, elevating its market capitalization beyond $2 trillion alongside other tech giants like Apple, Microsoft, and Nvidia.

The positive results from Google’s first quarter followed the launch of several new AI products within its Gemini AI suite. At the recent Google I/O developer conference, the company unveiled an ambitious universal AI assistant capable of interacting through smart glasses. Google has claimed that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.

While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to his colleagues, he noted that it could become a beneficial factor for Search monetization in the future. He also indicated that AI innovations are already making a significant impact on Google Cloud, projecting a 27% rise in Cloud revenue year-over-year, aligning with sentiments from other analysts.

J.P. Morgan’s Doug Anmuth reinforced this positivity and designated Google as one of the top technology stocks for investment, alongside Uber and Amazon, highlighting the encouraging advancements in generative AI ahead of Alphabet’s earnings announcement.

However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is favorable, it remains uncertain whether these advancements will lead to long-term sales growth for the company.

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