Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings report, which is set to be released after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have recently raised their revenue forecasts for Alphabet, Google’s parent company, citing the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search as significant contributors to anticipated sales growth. They expressed optimism about the potential benefits of broader AI integration within Google’s ecosystem, despite initial challenges when AI Overviews rolled out and garnered mixed reactions online. As a result, they have increased their price target for Google’s stock from $200 to $206.
In its previous earnings report for the first quarter in April, Google experienced a remarkable 60% profit increase, largely attributed to its AI initiatives, which thrust its market capitalization beyond the $2 trillion mark, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of launches of new AI products, particularly from its Gemini AI suite, showcased during its Google I/O developer conference. Noteworthy among these is an advanced universal AI assistant aimed to operate via smart glasses, with Google asserting that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives has a more cautious outlook on the immediate effects of AI Overviews, he acknowledges their potential to enhance Search monetization over time. He also noted that AI is already benefiting Google Cloud, predicting a 27% year-over-year increase in Cloud revenue, a sentiment shared by other analysts on Wall Street.
J.P. Morgan’s Doug Anmuth mirrored the optimistic outlook, designating Google as one of the investment firm’s top tech stocks along with Uber and Amazon, and noted that he is impressed by Google’s advancements with Generative AI as they head into the second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is favorable, the long-term impact of AI on the company’s sales remains uncertain.