Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
As Boeing seeks to raise $19 billion amid a backdrop of delivery delays and worker stoppages, Bank of America and Wedbush have adjusted their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the incorporation of Gemini into Google Cloud and AI Overviews in Google Search will significantly bolster sales.
In a research note published at the end of last week, they expressed optimism about the expanding AI integrations within Google’s ecosystem, asserting that a wider deployment of AI overviews would likely enhance engagement in the core Search business. This positive outlook comes despite some initial problems with AI overviews, which faced criticism online for generating errors and misinformation. Post and Bansal have raised their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely attributed to AI contributions. Following this announcement, the company’s stock price surged, elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was bolstered by a series of launches of new AI products under the Gemini AI umbrella. At the recent Google I/O developer conference, the company showcased an advanced AI assistant designed to interact with users through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, he noted in a Monday research note that these developments might eventually support Search monetization. Ives also pointed out that AI is already having a favorable impact on Google Cloud, predicting a 27% revenue increase for the segment compared to last year.
J.P. Morgan’s Doug Anmuth shared the positive outlook, ranking Google among the firm’s top tech investment picks alongside Uber and Amazon, indicating encouragement from the progress in generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current sentiment surrounding AI at Google is optimistic, the long-term impact of AI on driving sales remains uncertain.