Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, crediting the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search for the anticipated sales boost. They expressed confidence that these AI features will stimulate greater activity within Google’s core Search business, despite early challenges faced during the rollout, which included instances of the tool producing errors. They adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit surge in the first quarter, driven in part by its AI initiatives. This success led to a substantial rise in its stock value, elevating the company’s market cap to over $2 trillion, joining the ranks of giants like Apple, Microsoft, and Nvidia.
The success of Google in the first quarter followed the introduction of numerous AI products under its Gemini program. At the recent Google I/O developer conference, the company showcased an advanced AI assistant designed to interact through smart glasses. Google asserts that its newest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews than his counterparts, he suggested it could eventually support Search monetization. He noted that AI is already contributing positively to Google Cloud, projecting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, naming Google as one of its top tech stock picks alongside Uber and Amazon, indicating a favorable outlook on developments in generative AI leading up to Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current narrative surrounding Google’s AI is promising, the long-term impact on sales remains uncertain.