Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal revised their revenue forecasts for Google upward, citing the integration of Gemini AI into Google Cloud and AI Overviews in Google Search as key drivers for sales growth. They expressed confidence that the wider implementation of AI tools would increase user activity in Google’s core Search business, despite some initial issues that led to online jokes about the accuracy of AI Overviews. Consequently, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, inspired in part by its AI developments, resulting in a significant rise in its stock price and pushing its market capitalization beyond $2 trillion. This places Google alongside industry giants Apple, Microsoft, and Nvidia.
Google’s impressive quarterly performance followed a series of new AI product launches under the Gemini initiative. At its recent Google I/O developer conference, the company unveiled a state-of-the-art AI assistant capable of visual and verbal interaction through smart glasses. Google claims its latest Gemini iteration operates 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives is somewhat cautious about the potential of AI Overviews, he did mention that they might support Search monetization as time goes on. He also believes that AI is currently enhancing Google Cloud services. Similar to other market analysts, Ives anticipates a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan highlighted the firm’s positive outlook, naming Google as one of their top tech stock picks alongside Uber and Amazon, and noted optimism regarding advancements in generative AI ahead of Alphabet’s earnings announcement.
Raymond James analyst Josh Beck added a word of caution; despite the current optimistic view of AI’s role in Google’s future, it remains uncertain whether AI will contribute to sustained sales growth in the long term.