Google’s incorporation of artificial intelligence is expected to enhance its performance in the upcoming second-quarter earnings report, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Analysts from Bank of America and Wedbush have adjusted their revenue forecasts for Google, anticipating that the integration of its Gemini AI into Google Cloud and the AI Overviews features in Google Search will boost sales. Bank of America’s Justin Post and Nitin Bansal expressed optimism about the potential for increased activity in Google’s core Search business as a result of broader AI implementations, despite some initial challenges during the rollout of AI Overviews, which faced criticism for inaccuracies. They increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to advancements in AI technology. This growth caused its stock price to rise significantly, bringing its market capitalization beyond the $2 trillion threshold, positioning it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of launches of new AI-driven products as part of its Gemini AI initiative. Highlights from its recent developer conference, Google I/O, included an innovative AI assistant capable of visual and verbal interactions through smart glasses. Google asserts that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was more cautious regarding the immediate impact of AI Overviews, he noted in a recent report that it could support Search monetization in the long run. Additionally, Ives observed that AI developments are already positively influencing Google Cloud, predicting a 27% revenue growth in that sector compared to last year.
J.P. Morgan analyst Doug Anmuth also expressed a positive outlook on Google, identifying it as one of the firm’s top technology stock picks, alongside Uber and Amazon. He indicated that there is considerable enthusiasm surrounding Google’s progress in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment regarding Google’s AI is favorable, its long-term impact on sales remains uncertain.