Google’s AI Buzz: Will Earnings Soar?

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Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI initiatives will positively impact its second-quarter earnings, with parent company Alphabet scheduled to release its earnings report after the market closes on Tuesday.

Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts upward for Google, attributing the anticipated growth to the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search. They expressed optimism in a recent research note, stating that a broader rollout of AI Overviews has the potential to enhance user engagement in the core Search business, despite some initial challenges with the AI tool that led to a series of online jokes regarding its errors. Consequently, they increased their price target for Google’s stock from $200 to $206.

In April, Google revealed a remarkable 60% profit surge in the first quarter, largely driven by AI advancements, which contributed to a significant rise in its stock price. This growth propelled the company’s market capitalization to over $2 trillion, allowing it to join the ranks of Apple, Microsoft, and Nvidia.

The company’s strong first-quarter results followed a flurry of new artificial intelligence product launches as part of its Gemini AI initiative. During its major developer conference, Google I/O, it introduced a futuristic universal AI assistant capable of visual interactions via smart glasses. Google also claims that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.

While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews, suggesting they could eventually enhance search monetization, he acknowledged that AI is already benefiting Google Cloud. Ives, like many other analysts, expects a 27% year-over-year revenue increase for Google Cloud.

Meanwhile, J.P. Morgan analyst Doug Anmuth reiterated the positive outlook and included Google among the firm’s top tech stock recommendations, citing encouragement by advancements in generative AI ahead of Alphabet’s second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the current favorable narrative surrounding Google’s AI, it remains uncertain whether these technologies will lead to sustained long-term sales growth for the company.

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