Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will boost its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to report its earnings on Tuesday after the market closes.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google upwards. Analysts Justin Post and Nitin Bansal of Bank of America highlight the positive impact of including the Gemini AI system into Google Cloud and the AI Overviews feature in Google Search, which they expect will enhance sales.
In a recent research note, they expressed optimism about the growing use of AI across Google’s platforms, suggesting that a wider introduction of AI Overviews could lead to increased user engagement in the Search segment. This comes even after an initial rollout of AI Overviews faced challenges, including public ridicule for producing errors. Post and Bansal have upped their price target for Google’s stock from $200 to $206.
Earlier this year, in April, Google reported a remarkable 60% increase in profits for the first quarter, partly attributed to its AI initiatives. This strong financial performance led to a surge in its stock price, pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s positive first-quarter results followed months of launching new AI products under its Gemini AI umbrella. Notable announcements made at Google’s developer conference, Google I/O, included plans for a universal AI assistant capable of interacting through users’ smart glasses. Google contends that its latest Gemini AI system is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives is somewhat cautious about the AI Overviews, he did indicate that they might eventually serve as a boost to Search monetization. He noted that AI is already contributing positively to Google Cloud, predicting a 27% rise in Cloud revenue compared to last year.
Doubling down on the optimistic outlook, Doug Anmuth from J.P. Morgan declared Google as one of the top tech stocks, alongside Uber and Amazon, citing encouraging progress in generative AI in anticipation of Alphabet’s earnings report for the second quarter.
However, Raymond James analyst Josh Beck cautioned that while the current AI developments for Google look promising, the long-term effect on sales driven by AI remains uncertain.