Google’s advancements in artificial intelligence are expected to positively influence its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to release its earnings report after market close on Tuesday.
Both Bank of America and Wedbush analysts revised their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America noted that the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search could significantly enhance sales.
“We remain optimistic about the increasing AI integrations across Google’s ecosystem and believe that a broader implementation of AI Overviews will boost engagement in the core Search business,” they stated in a research note published last week. This assessment comes despite some early challenges with the AI Overviews, which faced criticism for generating errors and misleading content. Consequently, they raised their price target for Google stock from $200 to $206.
In its April earnings report, Google revealed a remarkable 60% increase in profits during the first quarter, driven in part by its AI initiatives. This success propelled the company’s stock price upward, elevating its market value beyond $2 trillion, establishing it alongside major tech firms like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed a series of AI product launches related to its Gemini offerings. During its recent developer conference, Google showcased a universal AI assistant capable of interacting through a user’s smart glasses. The company claims that the latest version of Gemini AI is 20% faster than the newest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed moderate optimism about AI Overviews compared to Post and Bansal, he noted that it could become beneficial for Search monetization in the future. Moreover, Ives highlighted that AI is already having a positive impact on Google Cloud, projecting a 27% increase in Cloud revenue year-over-year, aligning with broader Wall Street expectations.
Echoing this positive outlook, Doug Anmuth from J.P. Morgan ranked Google among the firm’s top tech investments, alongside Uber and Amazon, expressing optimism about the progress in generative AI ahead of Alphabet’s earnings announcement.
However, Josh Beck from Raymond James cautioned that although the current narrative surrounding AI is favorable, it remains uncertain whether AI will continue to drive Google’s sales growth in the long term.