Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, anticipating a positive impact from the company’s artificial intelligence initiatives. Alphabet, the parent company of Google, is due to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upward, citing the incorporation of the Gemini AI platform into Google Cloud and enhancements in Google Search’s AI capabilities as driving factors for increased sales. Despite initial challenges with the AI overviews feature, which faced criticism online for its inaccuracies, the analysts remain confident that these AI advancements will stimulate greater usage of Google’s core search services. They have raised their price target for Google’s stock from $200 to $206.
In its first quarter, Google reported a remarkable 60% increase in profits, aided by the success of its AI initiatives. This surge in earnings significantly boosted its stock price, elevating the company’s market valuation to over $2 trillion, joining tech giants such as Apple, Microsoft, and Nvidia.
The positive financial results followed several months of new AI product launches, including the recent presentation of advanced features at the Google I/O developer conference, which showcased a future AI assistant capable of visual recognition and interaction via smart glasses. Google asserts that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some reservations about the immediate impact of AI Overviews, he noted that they could provide a supportive boost to Google’s search monetization in the long term. He also highlighted the ongoing positive influence of AI on Google Cloud, predicting a 27% rise in its revenue compared to the prior year.
J.P. Morgan’s Doug Anmuth joined the optimistic chorus, naming Google among his firm’s top technology stock picks along with Uber and Amazon, and expressing excitement about the advancements in generative AI leading up to Alphabet’s second-quarter earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding AI at Google is favorable, the long-term effects on the company’s sales generated by AI remain uncertain.