Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will contribute positively to its earnings report for the second quarter, set to be announced after the market closes on Tuesday.
These financial institutions have raised their revenue forecasts for Google’s parent company, Alphabet. Bank of America’s analysts, Justin Post and Nitin Bansal, believe that the integration of Gemini into Google Cloud and AI Overviews into Google Search will enhance sales. They stated in a recent research note that they remain optimistic about the growing use of AI across Google’s platforms and expect that the broader implementation of AI overviews will increase user engagement in the core Search business. This positive outlook comes despite early challenges in the rollout of AI overviews, which initially garnered some ridicule on social media for errors and inaccuracies. As a result, Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, in part attributable to its AI initiatives. This surge in profits led to a rise in the company’s stock price, elevating its market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The company’s strong performance followed several months of new artificial intelligence product launches as part of its Gemini AI initiative. Notable announcements during the Google I/O developer conference included a futuristic universal AI assistant equipped to interact through users’ smart glasses, along with claims that the latest iteration of Gemini AI is 20% faster than the most recent ChatGPT.
While Wedbush analyst Dan Ives expressed a more reserved view on the immediate impact of AI Overviews, he noted in a Monday research note that it could eventually enhance Search monetization. He also emphasized that AI is already a significant growth factor for Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, consistent with other Wall Street analysts’ expectations.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook for Google, naming it one of his firm’s top technology stock picks alongside Uber and Amazon, expressing optimism regarding advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is encouraging, its long-term impact on sales remains to be seen.