Analysts from Wedbush, J.P. Morgan, and Bank of America predict strong second-quarter earnings for Google, driven by advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to release its earnings report after market close on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this boost to the integration of the Gemini AI system into Google Cloud and the AI Overviews feature in Google Search. They express optimism about the potential for AI to enhance user engagement in the core Search business, despite earlier issues with the AI Overviews tool which drew criticism for its inaccuracies. Post and Bansal have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, significantly aided by AI developments. This surge in profits led to a rise in its stock price, elevating the company’s market capitalization above the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter coincided with the launch of various new AI products as part of Google’s Gemini offerings. Highlights from the Google I/O developer conference included an advanced AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives has a more cautious outlook on AI Overviews, he noted that it could eventually support revenue growth from Search. He also highlighted that AI is already positively impacting Google Cloud, predicting a 27% revenue increase for Cloud services compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic view, listing Google among the investment firm’s top tech picks alongside Uber and Amazon, fueled by encouraging progress in generative AI as the company approaches its second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the current positive AI narrative, the long-term impact of AI on Google’s sales remains uncertain.