Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google, crediting the integration of the Gemini AI system into Google Cloud and AI Overviews in Google Search as key factors for increasing sales. They noted that the broader rollout of AI features is expected to enhance activity in the core Search business, despite some initial missteps with the AI Overviews that drew public mockery for inaccuracies. As a result, they have raised their stock price target for Google from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, largely attributed to AI advancements, which propelled its stock price upward, boosting its market capitalization beyond $2 trillion and placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Recent innovations from Google, particularly during its developer conference Google I/O, demonstrated continued investment in AI, including the launch of a universal AI assistant capable of interacting through smart glasses. Google has claimed that its Gemini AI system outperforms the latest version of ChatGPT by being 20% faster.
While Wedbush analyst Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged that they could become beneficial for Search monetization in the long run. He also anticipates that AI is already contributing positively to Google Cloud, predicting a 27% rise in Cloud revenue compared to the prior year.
Doug Anmuth from J.P. Morgan expressed a similarly positive view, naming Google among its top tech investment picks, alongside Uber and Amazon, and highlighting ongoing progress in generative AI ahead of Alphabet’s earnings report. Conversely, Raymond James analyst Josh Beck cautioned that while the current excitement surrounding AI is favorable, its long-term effect on Google’s sales remains uncertain.