Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings performance. Alphabet, the parent company of Google, is scheduled to announce its earnings results on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, citing the company’s integration of its Gemini AI with Google Cloud and AI Overviews in search results as a key driver for revenue growth. They expressed optimism about the expanding use of AI across Google, anticipating that a wider implementation of AI overviews will stimulate activity in the core Search business, despite initial mix-ups during the rollout that drew humor online. As a result, they raised their price target for Google stock from $200 to $206.
In April, Google announced a remarkable 60% rise in profits during the first quarter, partially credited to its AI developments. This prompted a significant surge in its stock price, elevating the company’s market valuation beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s success in the first quarter was bolstered by the introduction of new artificial intelligence features, particularly its Gemini AI products unveiled at the Google I/O developer conference. Among these features is an AI assistant designed to interface with smart glasses, with Google asserting that its latest Gemini AI outperforms the newest iteration of ChatGPT by 20%.
While Dan Ives from Wedbush expressed some reservations about the impact of AI Overviews shortly, he noted that it could eventually support monetization efforts in Search. He also pointed out that AI capabilities are already benefiting Google Cloud, and like many Wall Street analysts, expects a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan echoed the positive outlook, identifying Google as one of their preferred tech stocks, alongside Uber and Amazon. He expressed encouragement regarding GenAI advancements ahead of Alphabet’s upcoming earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current AI-centered narrative is favorable for Google, the long-term impact on sales remains uncertain.