Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are set to positively influence its second-quarter earnings. Alphabet, the parent company of Google, is scheduled to release its earnings report after the market closes on Tuesday.
Recent reports indicate that Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts upward for Google, attributing this change to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They express optimism over the growing AI applications within Google’s ecosystem and anticipate that a broader implementation of AI overviews will enhance user engagement in its core Search operations. Despite some challenges encountered during the initial rollout of AI overviews, which faced criticism for producing errors, they have increased their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by its AI initiatives. The positive financial performance led to a surge in the company’s stock price, elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed months of launching new AI products as part of its Gemini AI platform. Notable announcements made during the Google I/O developer conference included an innovative universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the most current version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view regarding the immediate impact of AI Overviews, he acknowledged the potential for long-term benefits for Search monetization. Furthermore, he highlighted that AI has already started to positively affect Google Cloud, predicting a 27% year-on-year rise in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook, naming Google among the investment firm’s top tech stocks, alongside Uber and Amazon. He emphasized his team’s enthusiasm for the advancements in generative AI ahead of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that, despite the current positive narrative surrounding Google’s AI developments, the long-term impact of AI on Google’s sales remains uncertain.