According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence may enhance its second-quarter earnings. Google’s parent company, Alphabet, is expected to release its earnings report on Tuesday.
Analysts from Bank of America and Wedbush have adjusted their revenue forecasts upward for Google. Justin Post and Nitin Bansal from Bank of America believe that the integration of Google’s Gemini into Google Cloud and the introduction of AI Overviews in Google Search will contribute to increased sales.
In a recent research note, they expressed optimism about the expanding AI features within Google’s ecosystem, suggesting that a wider implementation of AI overviews could lead to increased user activity in Google Search. This optimism persists despite initial hiccups during the rollout of AI overviews, which faced criticism online for producing errors. The analysts also raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, partly fueled by AI developments. This financial success drove its stock price up, elevating its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed months of launching new AI products as part of the Gemini AI initiative. At its recent Google I/O developer conference, the company unveiled a universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed cautious optimism regarding AI Overviews, deeming it a potential boon for Search monetization over time, he also noted that AI is already positively impacting Google Cloud. He, along with other Wall Street analysts, anticipates a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similar outlook, naming Google, alongside Uber and Amazon, as one of the firm’s top tech stock picks and expressing enthusiasm for the progress in generative AI in anticipation of Alphabet’s second-quarter earnings report.
Conversely, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is promising, the long-term impact of AI on driving sales remains uncertain.