Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to disclose its earnings after market hours on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, attributing the anticipated growth to the company’s integration of its Gemini AI into Google Cloud and AI Overviews in Search. They expressed optimism in their research note, stating, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite some challenges during the initial AI overview rollout, which faced criticism for errors and inaccuracies. They raised their price target for Google’s stock from $200 to $206.
In its previous quarterly report, Google announced a remarkable 60% increase in profits for the first quarter, significantly driven by AI initiatives. This performance led to a surge in its stock price, elevating the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results were supported by the introduction of new AI products through its Gemini offerings. At the recent Google I/O developer conference, the company unveiled a universal AI assistant capable of interacting through smart glasses, claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives remains cautious regarding the long-term impact of AI Overviews, he acknowledged its potential to enhance Search monetization gradually. He noted that AI is already positively affecting Google Cloud revenues, with expectations of a 27% increase from the previous year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, naming Google among its top technology stocks alongside Uber and Amazon, motivated by advancements in Generative AI ahead of Alphabet’s earnings report. Conversely, Raymond James analyst Josh Beck cautioned that, despite the current promising narrative surrounding AI, the long-term effects on Google’s sales remain uncertain.