Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, coinciding with Alphabet’s earnings report scheduled for Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, attributing this optimism to the integration of Gemini into Google Cloud and AI Overviews in Google Search, both of which are expected to stimulate sales. In their latest research report, they expressed confidence in the growing AI capabilities within Google’s ecosystem, stating that the broader implementation of AI Overviews is likely to increase user engagement with the company’s core Search business. Despite some initial challenges with the rollout of AI Overviews, which garnered attention for producing errors, they raised their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable 60% increase in profits, fueled in part by its AI initiatives, which contributed to a surge in its stock price and pushed its market capitalization above $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
The positive momentum for Google in Q1 followed the rollout of new AI products as part of its Gemini offerings, including a futuristic universal AI assistant introduced at the Google I/O developer conference that can interact through users’ smart glasses. Google asserts that its latest Gemini AI model operates 20% faster than the latest iteration of ChatGPT.
Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews’ potential than Post and Bansal but acknowledged that it could support Search monetization in the long run. He also noted that AI is already benefiting Google Cloud, anticipating a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth echoed the overall positive outlook, listing Google as one of the firm’s top tech stock picks alongside Uber and Amazon, citing optimism about GenAI developments ahead of Alphabet’s second-quarter earnings release. Conversely, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is favorable, the long-term impact on sales remains uncertain.