Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, largely attributing this sentiment to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upward, citing enhancements brought by the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed their confidence in a research note, stating that the broader implementation of AI tools is likely to increase user engagement in Google’s core Search business, despite some initial difficulties that led to humorous instances online. As a result, they have raised Google’s stock price target from $200 to $206.
In April, Google revealed a remarkable 60% profit surge in the first quarter, largely fueled by its AI initiatives. This impressive performance resulted in a significant rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The positive momentum in Google’s first quarter followed a series of new AI product launches as part of its Gemini AI platform. Highlights from its recent Google I/O developer conference included the introduction of a comprehensive AI assistant capable of interacting through smart glasses, with claims that the latest Gemini AI is 20% faster than the current ChatGPT.
Despite a more cautious outlook on AI Overviews, Wedbush’s Dan Ives noted their potential long-term benefits for Search monetization. He also highlighted that AI is already contributing positively to Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth reinforced the optimistic outlook, naming Google as one of the firm’s top technology stock picks, alongside Uber and Amazon. He expressed encouragement about the progress in Generative AI as Alphabet approaches its second-quarter earnings release.
However, Raymond James analyst Josh Beck has raised concerns, noting that while the current narrative around AI is positive for Google, the long-term impact on sales remains uncertain.