Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s recent advancements in artificial intelligence will contribute positively to its second-quarter earnings. Google’s parent company, Alphabet, is expected to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have boosted their revenue forecasts for Google, attributing this adjustment to the integration of the Gemini project into Google Cloud and enhancements in AI functionalities within Google Search. They expressed optimism in a recent research note, stating that the expansion of AI tools should increase engagement in Google’s core Search operations. This comes despite some initial challenges faced during the rollout of AI overviews, which attracted criticism online for inaccuracies. As a result, they increased their price target for Google’s stock from $200 to $206.
In the previous quarter, Google reported an impressive 60% surge in profits, largely driven by AI innovations. This performance led to a significant rise in its stock price, elevating the company’s market valuation beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The strong first-quarter results followed multiple launches of new AI products as part of Google’s Gemini offerings. At its recent developer conference, Google I/O, the company introduced an advanced AI assistant capable of interacting through smart glasses. The latest version of Gemini AI is also said to be 20% faster than the current ChatGPT.
While Wedbush analyst Dan Ives expressed some reservations about the potential of AI Overviews, he noted that it could still positively impact Search revenue monetization in the long run. He also highlighted that AI has already been beneficial for Google Cloud, predicting a 27% revenue increase from the previous year, echoing sentiments shared by several Wall Street analysts.
Doug Anmuth from J.P. Morgan confirmed the favorable outlook, naming Google among their top tech investment picks alongside Uber and Amazon, while indicating that they are optimistic about the progress in generative AI leading up to Alphabet’s earnings announcement. Raymond James analyst Josh Beck cautioned, however, that while the current AI developments appear promising, their long-term impact on Google’s sales remains to be seen.