Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, attributing this positivity to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts upward for Google. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that the integration of Google’s Gemini AI into its Cloud services and the AI Overviews feature in Google Search will drive increased sales.
“We remain optimistic about the growing AI integrations throughout Google’s ecosystem and believe that a wider implementation of AI Overviews will enhance activity in the core Search business,” they noted in a recent research report, despite the initial challenges that AI Overviews faced, which led to some humorous responses online due to inaccuracies. The analysts have also raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, aided by its AI developments. This surge led to a jump in its stock price, increasing the company’s market capitalization to over $2 trillion, aligning it with tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed significant launches of new AI products under the Gemini AI umbrella. The latest announcements during the Google I/O developer conference featured an ambitious AI assistant designed to operate through users’ smart glasses. Google claims this latest version of Gemini AI outpaces the newest ChatGPT by 20% in speed.
Although Dan Ives from Wedbush expressed a more cautious view on the long-term impact of AI Overviews, he acknowledged that it could become beneficial for Search monetization over time. He also noted that AI is already contributing positively to Google Cloud, with expectations among analysts of a 27% revenue increase in that sector compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, naming Google as one of the top technology stocks alongside Uber and Amazon, expressing encouragement regarding the advancements in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck pointed out potential uncertainties, emphasizing that while the current narrative around AI is positive for Google, its effectiveness in driving long-term sales growth remains to be seen.