Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are set to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google upward, particularly highlighting the impact of integrating Gemini into Google Cloud and the AI Overviews feature within Google Search on sales. They expressed optimism in a recent research note, stating that the expanded use of AI across Google’s platforms should increase user engagement, despite some initial issues with AI Overviews that drew criticism online for inaccuracies. Consequently, they raised their target price for Google’s stock from $200 to $206.
In April, Google reported a 60% increase in profits for the first quarter, bolstered by its AI initiatives, prompting a surge in its stock and elevating its market capitalization to over $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was fueled by a series of releases from Google’s Gemini AI product line. During its recent developer conference, Google introduced an ambitious AI assistant designed to interact through smart glasses, claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impacts of AI Overviews, he did suggest that it could eventually support monetization in Google Search. Ives also noted that AI is already favorably influencing Google Cloud, forecasting a 27% year-over-year revenue increase in that sector.
Doug Anmuth from J.P. Morgan expressed a similar positive outlook, naming Google as one of the firm’s top technology picks alongside Uber and Amazon. He mentioned being encouraged by the advancements in generative AI as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck warned that while the current sentiment surrounding AI at Google is favorable, it remains uncertain whether these AI developments will sustainably boost sales in the long run.