Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will likely enhance its earnings for the second quarter, with Alphabet set to announce its earnings on Tuesday after the market closes.
Bank of America analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google. They expect the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search to significantly boost sales. In a recent research note, they expressed optimism about the increasing AI applications within Google’s ecosystem, believing that a broader implementation of AI overviews will stimulate greater engagement in its core Search business. This positive outlook persists even after initial challenges with the AI Overviews launch, which faced criticism for inaccuracies. Consequently, they raised their stock price target for Google from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, partially attributed to its AI initiatives, propelling its stock price and market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following months of releasing new AI products under the Gemini brand, Google generated enthusiasm with announcements at its recent developer conference, Google I/O. Noteworthy among these was a futuristic AI assistant capable of interacting through smart glasses, with claims that the latest iteration of Gemini AI is 20% faster than the most current version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view regarding the impact of AI Overviews, he acknowledged its potential to contribute positively to Search monetization in the long run. He also noted that AI has already had a positive impact on Google Cloud, forecasting a 27% revenue increase in that sector year-on-year.
In alignment with the optimistic sentiments of other analysts on Wall Street, J.P. Morgan’s Doug Anmuth highlighted Google as one of their top technology picks, alongside Uber and Amazon, and stated that they are encouraged by the progress in generative AI leading up to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google appears optimistic, the long-term effects on sales due to AI’s influence are still uncertain.