According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence (AI) could enhance its earnings for the second quarter. The parent company, Alphabet, is expected to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, noting that the integration of Gemini into Google Cloud and AI Overviews in Google Search are likely to drive sales. They expressed optimism about the impact of AI integrations on Google’s ecosystem, anticipating that a wider release of AI overviews will boost activity in its core Search business. This optimism remains intact even after initial challenges with the AI overviews, which faced criticism online for producing errors. They have 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, largely attributed to its AI ventures. This strong performance led to a significant increase in its stock price, elevating its market capitalization beyond $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
The company’s successful first quarter came after the launch of various AI products as part of its Gemini AI suite. At the recent Google I/O developer conference, it introduced an advanced AI assistant capable of visual and verbal interaction through smart glasses. Google has claimed that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he suggested that it could become beneficial for Search monetization over time. He also noted that AI is already contributing positively to Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic outlook, designating Google as one of the firm’s leading tech stock picks, alongside companies like Uber and Amazon. He remarked on the encouraging progress in generative AI as Alphabet prepares to release its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is positive, the long-term effects on sales due to AI integration remain uncertain.