Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s developments in artificial intelligence will positively influence its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search will enhance sales.
In a recent research report, they expressed optimism about the ongoing integration of AI within Google’s ecosystem, suggesting that a broader implementation of AI overviews could lead to increased activity in the core Search business. This optimism persists despite some initial issues with AI overviews, which faced criticism for producing inaccuracies. Consequently, Post and Bansal have updated their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, aided by AI developments. This strong performance led to a surge in the company’s stock price, elevating its market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
The robust first-quarter results followed several months of new AI product launches as part of Google’s Gemini offerings. Recent presentations at the Google I/O developer conference included an innovative AI assistant capable of visual and verbal communication through smart glasses. Google claims that its new Gemini AI functions 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on AI Overviews compared to Post and Bansal but mentioned in a report that this feature could eventually support monetization in the Search sector. Ives also noted that AI is already contributing positively to Google Cloud’s performance, with analysts anticipating a 27% rise in Cloud revenue compared to last year.
Doug Anmuth of J.P. Morgan shared an optimistic outlook as well, designating Google as one of their top technology stocks, alongside Uber and Amazon, and noted their positive feelings towards the advancements in generative AI leading up to Alphabet’s upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that, despite the current positive narrative surrounding AI’s impact on Google, the lasting influence on sales remains uncertain.