Double-Digit Growth For Google Expected Amidst AI Push

Google parent Alphabet is expected to announce profit of about $23 billion (£18bn) on revenue of about $70.7bn in the second quarter in its report to investors on Tuesday, according to analysts’ estimates, up 25 percent and 14 percent, in its fourth straight quarter of double-digit growth as the biggest tech companies prepare to announce earnings over the coming two weeks.

Alphabet’s figures will be scrutinised closely amidst the AI frenzy of the past year and a half for signs that the company’s core search offering is not losing users to AI chatbots such as ChatGPT, and that its own AI offerings are competitive, analysts said.

The company’s growth is expected from strong demand for cloud infrastructure services to power AI offerings and a recovery in the ad market, according to industry watchers.

Wedbush analyst Scott Devitt said in a note that he believes Google Search will see growth of up to 12.8 percent and that AI has not harmed the search business.

AI-powered Pixel

At its developer conference in May Google broadly rolled out AI summaries attached to its search results, but backtracked on the plan after users complained the summaries contained false or bizarre information.

The company is launching new Pixel smartphones with AI capabilities in August, bringing forward its usual autumn launch after Apple announced AI capabilities in June.

Apple’s stock reached an all-time high a week ago on AI optimism, but have declined around 5 percent since then.

There is increased pressure on tech companies to deliver strong growth after shares in the biggest tech firms sank last week on fears their profit growth is poised to slow and that the hype around AI may be overblown.

Profit growth

An “epic” reversal for big tech companies may continue on Wall Street unless they can convince analysts to raise their sales estimates for the second half of the year and 2025, Goldman Sachs analysts said in a note.

Profits for Apple, Microsoft, Nvidia, Alphabet and Amazon are expected to grow 29 percent year-on-year in the second quarter, according to Bloomberg data, but that is down from the previous three quarters, when growth for the companies ranged from 44 percent to 29 percent.

Tesla is also expected to announce earnings on Tuesday, with Apple, Microsoft, Amazon and Meta following next week.

Tesla’s profit is expected to decline some 37 percent in the quarter to around $1.7bn, with sales declining 1 percent to $24.6bn amidst slowing demand worldwide and increased competition in China, spurring price cuts.

Nevertheless Tesla’s shares are up nearly 70 percent from an April low as investors look beyond EV sales to the company’s self-driving initiatives and its promised robotaxi service – both of which have helped Tesla benefit from AI speculation.