Analysts from Wedbush, J.P. Morgan, and Bank of America indicate that Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google, attributing this optimism to the integration of AI technologies like Gemini into Google Cloud and AI Overviews in Google Search. They noted that despite early challenges with AI Overviews, which faced public criticism for inaccuracies, the overall integration of AI across Google’s platform is seen as a positive factor for future sales. Their revised stock price target for Google has been increased from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, which was partially driven by AI contributions, leading to a significant surge in its stock price and pushing its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results were bolstered by continuous releases of new AI products under its Gemini AI initiative, including an ambitious universal AI assistant demonstrated at the Google I/O developer conference. This assistant is designed to operate through smart glasses, and Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives is slightly cautious about the immediate impact of AI Overviews, he believes it could enhance Search monetization over time and noted that AI is already benefiting Google Cloud. He predicts a 27% rise in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth expressed similar optimism, ranking Google alongside Uber and Amazon as one of the firm’s top tech stocks, citing excitement over advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding Google’s AI is positive, the long-term impact of AI on the company’s sales remains uncertain.