Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s second-quarter earnings, crediting advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, noting that the integration of the Gemini AI into Google Cloud and its AI Overviews in Search are expected to boost sales. They expressed confidence in AI’s role in enhancing user engagement within Search despite initial challenges that led to comedic mishaps with the AI Overviews tool. As a result, they have adjusted their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by its AI developments. This surge pushed the company’s stock price to new heights, elevating its market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance followed a series of AI product releases as part of its Gemini offerings. At the recent Google I/O developer conference, the company showcased innovations, including a universal AI assistant that could interact through smart glasses. Google stated that its latest AI iteration is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged their potential to enhance Search monetization in the long term. He also noted that AI is already positively influencing Google Cloud, predicting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth joined the chorus of optimism, ranking Google as one of their top technology stocks, alongside Uber and Amazon, highlighting progress in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative, the long-term effects of AI on Google’s sales remain uncertain.