Analysts from Wedbush, J.P. Morgan, and Bank of America are forecasting strong earnings for Alphabet, Google’s parent company, in the second quarter, attributing this positive outlook to the company’s advancements in artificial intelligence (AI). Alphabet is slated to release its earnings report on Tuesday.
The analysts have adjusted their revenue forecasts upward, with Bank of America’s experts, Justin Post and Nitin Bansal, highlighting the benefits from the integration of Google’s Gemini AI into Google Cloud and the new AI Overviews feature in Google Search, which is expected to enhance sales significantly. Despite initial challenges with the rollout of AI Overviews—where the feature faced criticism for producing erroneous content—the analysts remain optimistic. They have revised their price target for Google’s stock from $200 to $206.
In the first quarter, Google experienced a remarkable 60% increase in profits, largely driven by AI innovations. This financial success led to a significant rise in its stock price, pushing the company’s market capitalization beyond $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
The company has made substantial strides in AI, showcasing exciting advancements at its recent Google I/O developer conference, including a futuristic universal AI assistant intended to enhance user interaction through smart glasses. Notably, Google claims that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the long-term impact of AI Overviews on revenue, he acknowledged that AI is already making a positive difference in Google Cloud. Overall, Ives predicts that Google will see a 27% increase in Cloud revenue compared to last year. J.P. Morgan’s Doug Anmuth also expressed a favorable outlook, considering Google as one of the top technology stocks alongside Uber and Amazon, thanks to the progress in Generative AI.
However, Raymond James analyst Josh Beck cautioned that the long-term effect of AI on driving sales remains uncertain despite the current favorable narrative surrounding Google.
In summary, the optimistic outlook for Google’s second-quarter earnings, spurred by advancements in AI, particularly through its Gemini offerings, presents a promising future for the company as it continues to innovate in the technology sector. This positive sentiment reflects a growing belief in the potential of AI to transform the digital landscape and enhance business performance. As AI technology continues to mature, there is hope that it will yield sustained growth for Google and positively impact its market position.