Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings, with Alphabet set to announce its results on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have raised their revenue forecasts for the tech giant, attributing this to the integration of its Gemini AI into Google Cloud and AI Overviews within Google Search, which they believe will elevate sales. In a research note, they stated their optimism regarding the extensive AI integrations within Google’s ecosystem, which they expect will lead to increased activity in its core Search business, despite some initial setbacks with AI Overviews that attracted online criticism for inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, significantly bolstered by its AI initiatives, which led to a surge in its stock price and propelled the company’s market capitalization past the $2 trillion mark, joining industry leaders like Apple, Microsoft, and Nvidia.
The company’s strong performance in the first quarter can be attributed to the launch of various new AI products under its Gemini AI umbrella. Among the highlights presented at the Google I/O developer conference was a universal AI assistant designed to function through smart glasses, with Google asserting that its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews compared to his colleagues, he noted that these features could potentially enhance monetization for Google’s Search services in the long run. Additionally, he indicated that AI is already contributing positively to Google Cloud, projecting a 27% revenue increase in that sector compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similar optimistic view, positioning Google alongside Uber and Amazon as one of the top tech stocks due to the promising developments in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck has cautioned that while the current narrative surrounding AI at Google is favorable, it remains uncertain whether these technologies will drive sustained sales growth in the future.