Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are set to enhance its earnings for the second quarter, with the parent company Alphabet expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google. They predict that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will significantly boost sales. Despite some initial setbacks where AI Overviews faced criticism for inaccuracies, they expressed optimism about AI’s potential to increase user engagement in Google’s core Search business. They have revised their stock price target for Google from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI developments, which also led to a surge in its stock price and elevated the company’s market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s successful first quarter followed a series of new AI product launches, particularly related to its Gemini AI suite. At the recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant designed to interact with users via smart glasses. Google claims its newest Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush offered a more cautious perspective on AI Overviews, suggesting that while the tool may not have an immediate impact, it could bolster Search monetization in the long run. He also noted that AI is positively influencing Google Cloud, expecting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook, including Google among its top tech stock picks alongside Uber and Amazon. He expressed enthusiasm about the progress of generative AI ahead of Alphabet’s upcoming second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears positive, the long-term potential of AI to sustain sales growth remains uncertain.