Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s moves in artificial intelligence will positively influence its second-quarter earnings, with Alphabet set to announce these results after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the impact of integrating its Gemini AI features into Google Cloud and enhanced AI Overviews in Google Search. They expressed optimism about the potential for a broader rollout of these AI enhancements to generate increased engagement in Google’s core Search business, despite initial challenges that led to some online mockery over the accuracy of AI-generated content. Consequently, they raised their target price for Google’s stock from $200 to $206.
In its first-quarter report released in April, Google experienced a remarkable 60% profit increase, largely attributed to its AI developments. This impressive performance contributed to a significant rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The company’s robust first-quarter results followed a series of new AI product launches as part of its Gemini offerings. Noteworthy announcements from the Google I/O developer conference included the introduction of a future universal AI assistant capable of visual and verbal interaction through smart glasses. Google claims that its latest Gemini version is 20% faster than the newest iteration of ChatGPT.
Wedbush analyst Dan Ives presented a more cautious view on AI Overviews but acknowledged their potential as a future benefit for Search revenue. He noted that AI is already having a positive impact on Google Cloud, projecting, like other Wall Street analysts, a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared similar optimism, highlighting Google among their top tech stock picks alongside Uber and Amazon, noting encouragement from advancements in generative AI ahead of Alphabet’s earnings announcement.
However, Josh Beck of Raymond James cautioned that while the current narrative surrounding AI at Google seems favorable, the long-term effects on the company’s sales remain uncertain.