Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings when Alphabet, Google’s parent company, reports its financial results on Tuesday.
Both Bank of America and Wedbush have raised their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of AI features, such as Gemini in Google Cloud and AI Overviews in Google Search, will significantly increase sales.
In their research note from last week, they expressed optimism about the growing AI integrations across Google’s ecosystem and suggested that a wider rollout of AI overviews could drive increased engagement in the core Search business. This positive outlook comes despite some initial challenges with the AI overviews, which faced criticism for producing errors and misleading information. The analysts have also increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in first-quarter profits, largely fueled by their AI efforts, which led to a surge in the stock price and boosted the company’s market capitalization past the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance followed a series of new AI product launches associated with its Gemini AI capabilities. At its Google I/O developer conference, the company unveiled a universal AI assistant designed to interact through smart glasses, claiming that its latest Gemini AI performs 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives was cautious about the potential of AI Overviews, he noted that they could eventually support Search monetization. He also highlighted that AI technology is already benefiting Google Cloud, predicting a 27% growth in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a positive view, designating Google as one of the firm’s top tech stocks alongside Uber and Amazon. He expressed confidence in the progress of Generative AI in anticipation of Alphabet’s upcoming second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, it remains uncertain whether this will lead to sustained long-term sales growth for the company.