Google’s AI Surge: Earnings Expectations Soar!

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Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence advancements will enhance its second-quarter earnings performance. Alphabet, Google’s parent company, is set to announce its earnings following the market close on Tuesday.

Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, highlighting the anticipated impact of the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search. They expressed optimism about growing AI implementations throughout Google’s ecosystem, believing that the wider adoption of AI overviews will increase activity in the core Search business. This optimism comes despite early challenges during the rollout of AI overviews, where the feature faced criticism for errors. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.

In April, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by AI innovations, leading to a significant rise in its stock price and pushing its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.

Google’s robust performance in the first quarter was bolstered by the launch of new AI products under its Gemini AI platform. Notable announcements during the Google I/O developer conference included a futuristic universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.

While Wedbush’s Dan Ives had a more cautious outlook on AI Overviews compared to his counterparts, he acknowledged that it might eventually support Search monetization. He also noted that AI is already contributing positively to Google Cloud, predicting a 27% increase in its revenue year-over-year.

J.P. Morgan’s Doug Anmuth shared an optimistic view, ranking Google among the firm’s top technology stocks, along with Uber and Amazon, expressing enthusiasm about the progress in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current AI narrative for Google looks promising, the long-term impact on sales remains uncertain.

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