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 this Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, anticipating a boost in sales driven by the integration of the Gemini AI into Google Cloud and enhanced AI features in Google Search.
In a research note, they expressed optimism about Google’s AI advancements, suggesting that the wider implementation of AI overviews could increase user engagement in the core Search business. This comes despite a rocky start for the AI overviews, which initially led to comedic mockery online due to inaccuracies. Post and Bansal have raised their target price for Google stock from $200 to $206.
In April, Google announced a remarkable profit surge of 60% for the first quarter, partially attributed to its AI initiatives, resulting in a substantial increase in its stock price and pushing its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance was preceded by several new AI product launches as part of its Gemini AI suite. Among the highlights from its recent developer conference, Google I/O, was the introduction of a universal AI assistant capable of interacting through smart glasses, with claims that the latest Gemini AI is 20% faster than the newest ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, suggesting it might gradually benefit Search monetization, he acknowledged the current uplift in Google Cloud thanks to AI. He, along with other Wall Street analysts, expects Google to report a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared an optimistic outlook, ranking Google among his firm’s top tech investment choices, alongside Uber and Amazon, as they prepare for Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck noted that while the current narrative surrounding AI at Google is favorable, its long-term effects on sales performance remain uncertain.