Google’s AI Surge Sparks Analyst Optimism Ahead of Earnings Reveal

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Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s moves in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.

Both Bank of America and Wedbush have updated their revenue forecasts for Google, anticipating that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will lead to increased sales. Analysts Justin Post and Nitin Bansal from Bank of America expressed confidence in the growing AI features across Google’s services, suggesting that a more extensive rollout of AI overviews could stimulate greater user engagement in the core Search business. They noted that despite early issues with the AI overview rollout, which faced criticism for inaccuracies, they have raised their stock price target for Google from $200 to $206.

In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its advancements in AI, which also led to a surge in its stock price and pushed its market capitalization past the $2 trillion mark, joining technology giants like Apple, Microsoft, and Nvidia.

The company’s strong performance came following a series of new AI product launches as part of its Gemini offerings. At its recent developer conference, Google introduced a futuristic AI assistant that could interact through a user’s smart glasses. The company claims that its latest Gemini AI is 20% faster than ChatGPT.

While Wedbush analyst Dan Ives was somewhat cautious about the potential of AI Overviews, he suggested in a note that it could bolster Search monetization over time. However, Ives emphasized that AI is already positively impacting Google Cloud, with expectations of a 27% rise in Cloud revenue compared to last year.

J.P. Morgan’s Doug Anmuth also shared positive views, naming Google as one of its top tech stocks alongside Uber and Amazon, and expressing optimism regarding the progress of generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current sentiment around Google’s AI is favorable, the long-term impact on sales remains uncertain.

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