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

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Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will enhance its second-quarter earnings, as Alphabet, Google’s parent company, prepares to announce its earnings results on Tuesday.

Bank of America analysts Justin Post and Nitin Bansal have elevated their revenue forecasts for Google, attributing this boost to the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search. They expressed optimism about the ongoing integration of AI in Google’s operations, anticipating that a wider implementation of AI Overviews will increase user engagement in the core search business. Despite some initial challenges during the rollout of AI Overviews, which garnered online ridicule for errors, the analysts have increased their stock price target for Google from $200 to $206.

In April, Google reported a significant 60% increase in profits for the first quarter, partly due to its AI initiatives, leading to a spike in its stock price and elevating its market capitalization beyond the $2 trillion mark, alongside tech giants like Apple, Microsoft, and Nvidia.

The company’s impressive first-quarter results followed months of the introduction of new AI products under the Gemini brand. At its recent Google I/O developer conference, Google unveiled a next-generation universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.

While Wedbush analyst Dan Ives remains cautious about the immediate impact of AI Overviews, he noted that they could eventually support Search monetization. He also acknowledged the benefits that AI is already bringing to Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.

J.P. Morgan’s Doug Anmuth expressed a similar positive outlook, naming Google among the firm’s top technology stocks, alongside Uber and Amazon, and noted encouraging developments in generative AI as Alphabet approaches its second-quarter earnings release.

However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative surrounding Google’s AI, the long-term effects of AI on the company’s sales growth remain uncertain.

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