Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence advancements will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute part of this growth to the integration of the Gemini AI into Google Cloud and new AI Overview features in Google Search.
In a recent research note, they expressed optimism about the expanding AI features across Google’s platform, suggesting that a more extensive rollout of AI overviews could enhance activity in the core Search business. This comes despite some initial issues during the rollout of AI overviews, which faced criticism for errors and inaccuracies. Following these updates, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly aided by its AI efforts, which led to a surge in its stock price and allowed the company to reach a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance was fueled by multiple releases of new AI products, particularly its Gemini AI offerings showcased at the Google I/O developer conference. The company introduced a futuristic universal AI assistant designed to interact through users’ smart glasses and claimed that the latest iteration of Gemini AI operates 20% faster than ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on the AI Overviews compared to his colleagues but noted that it could potentially support Search monetization in the future. He also stated that AI is already having a positive impact on Google Cloud, anticipating a 27% revenue increase for the sector compared to the previous year.
Echoing this optimism, Doug Anmuth from J.P. Morgan highlighted Google as one of their top tech stock picks, alongside Uber and Amazon, citing excitement over the advancements in generative AI in anticipation of Alphabet’s upcoming earnings report.
However, Josh Beck from Raymond James cautioned that while the current outlook on AI for Google appears favorable, its long-term effects on driving sales remain uncertain.