Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively influence its second-quarter earnings, with parent company Alphabet scheduled to release earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search as key factors enhancing sales. They expressed optimism about the growing integration of AI throughout Google’s ecosystem, believing that a wider rollout of AI Overviews could drive increased engagement in the core Search business. Their price target for Google’s stock has been raised from $200 to $206, despite some initial challenges noted during the rollout of AI Overviews, which had been subject to online critique for mistakes and inaccuracies.
In April, Google reported an impressive 60% profit increase in the first quarter, a performance that was partly attributed to its AI initiatives. This surge in profits propelled the company’s stock price upward, elevating its market capitalization to over $2 trillion, placing it alongside major tech players like Apple, Microsoft, and Nvidia.
The company’s robust first-quarter results followed a series of new AI product launches linked to its Gemini offerings. Notably, at the Google I/O developer conference, Google introduced a futuristic universal AI assistant capable of interacting through smart glasses. Google’s latest Gemini AI claims to operate 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance on AI Overviews compared to Post and Bansal, he suggested that it could foster long-term benefits for Search monetization. Ives also noted that AI technologies are already making a positive impact on Google Cloud, projecting a 27% revenue increase in that segment compared to the previous year.
J.P. Morgan’s Doug Anmuth shared the optimistic outlook, designating Google as one of the firm’s top tech stocks, along with Uber and Amazon, and stating that his team is “encouraged by GenAI progress” in advance of Alphabet’s second-quarter earnings report. Conversely, analyst Josh Beck from Raymond James cautioned that while Google’s current AI narrative appears favorable, the long-term impact of AI on driving sales remains uncertain.