Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to release its earnings report following the market close on Tuesday.
Both Bank of America and Wedbush analysts have increased their revenue forecasts for Google. Justin Post and Nitin Bansal from Bank of America assert that integrating the Gemini AI into Google Cloud and introducing AI Overviews in Google Search will boost sales.
In a recent research note, the analysts stated, “We remain positive on growing AI integrations across Google’s ecosystem, and we believe a broader rollout of AI Overviews will result in increased activity in the core Search business,” despite some early hiccups when the tool faced criticism online for inaccuracies. They have raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly attributed to its AI initiatives. Consequently, the company’s stock price surged, elevating its market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed several months marked by the introduction of new AI products, particularly under its Gemini AI platform. Notably, at the Google I/O developer conference, the company unveiled a futuristic AI assistant capable of interacting through user smart glasses. Google also claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious approach towards the potential of AI Overviews than his colleagues, he noted that this feature “may become a tailwind for Search monetization over time.” He also pointed out that AI is already contributing positively to Google Cloud, with expectations of a 27% revenue increase in that segment compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook, ranking Google among the investment firm’s top tech stocks, alongside Uber and Amazon. He expressed optimism regarding the advancements in Generative AI ahead of Alphabet’s impending second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the immediate narrative around AI for Google appears favorable, its long-term impact on sales remains uncertain.