Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Alphabet Inc.’s second-quarter earnings, citing the impact of Google’s advancements in artificial intelligence. Alphabet, which is Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Analysts at Bank of America, Justin Post and Nitin Bansal, have adjusted their revenue forecasts upward, attributing this to Google’s integration of its Gemini AI technology into Google Cloud and the implementation of AI Overviews in Google Search. They expressed confidence that these developments will enhance sales despite some initial setbacks in the AI Overviews rollout, which faced criticism for inaccuracies. They have also increased their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% rise in profits for the first quarter, driven in part by its AI initiatives. This surge in profitability led to a significant increase in its stock price, elevating the company’s market capitalization to over $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The impressive performance in the first quarter followed a series of new AI product launches as part of Google’s Gemini offerings. At the recent Google I/O developer conference, the company introduced an advanced AI assistant designed to interact through smart glasses. Google claims that its latest AI technology is 20% faster than OpenAI’s ChatGPT.
Wedbush’s Dan Ives expressed a slightly tempered view on the potential of AI Overviews but noted that it could positively impact Search monetization in the future. He also highlighted that AI is currently beneficial for Google Cloud, projecting a 27% rise in Cloud revenue compared to last year.
Doug Anmuth of J.P. Morgan echoed the optimistic outlook and included Google among his firm’s top technology stock picks, alongside Uber and Amazon, expressing excitement about progress in generative AI ahead of the upcoming earnings report.
However, Josh Beck from Raymond James cautioned that while the current sentiment around Google’s AI efforts is promising, it remains uncertain whether these advancements will consistently drive sales growth for the long term.