Google’s AI Revolution: Will Earnings Skyrocket?

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Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s artificial intelligence initiatives will boost its second-quarter earnings when the company’s parent, Alphabet, reports its results on Tuesday.

Bank of America analysts Justin Post and Nitin Bansal upgraded their revenue projections for Google, citing the successful integration of Gemini into Google Cloud and AI Overviews in Google Search as key factors driving sales growth. They expressed optimism about the ongoing incorporation of AI throughout Google’s platforms, stating that a wider implementation of AI overviews could enhance user engagement in the Search segment. Despite some early challenges with the AI tool generating errors that led to online humor, they adjusted their target price for Google’s stock from $200 to $206.

In April, Google announced a remarkable 60% profit increase in the first quarter, significantly boosted by AI innovations, contributing to a rise in its stock price and a market capitalization exceeding $2 trillion, placing it among the elites like Apple, Microsoft, and Nvidia.

The company’s strong performance in the first quarter followed a series of new AI product launches, particularly its Gemini AI offerings, which were showcased at the Google I/O developer conference. Among these releases was a forward-thinking AI assistant designed to interact through smart glasses, with Google asserting that its latest Gemini AI operates 20% faster than the newest version of ChatGPT.

While Wedbush’s Dan Ives holds a slightly less optimistic view on the potential of AI Overviews, he indicated that these tools might eventually support Search monetization. He also noted that AI is already contributing positively to Google Cloud’s performance, predicting a 27% revenue increase from the previous year, in line with other Wall Street analysts’ expectations.

J.P. Morgan analyst Doug Anmuth shared a similar positive outlook, naming Google as one of their top tech stock picks alongside Uber and Amazon and highlighting the promising advancements in generative AI in anticipation of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current AI-driven narrative is favorable for Google, the long-term impact of AI on the company’s sales remains uncertain.

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