Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will lead to a positive second-quarter earnings report. Alphabet, Google’s parent company, is scheduled to release its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing this to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In their research note, they expressed optimism about the growing AI integration across Google’s services, suggesting that a wider implementation of AI Overviews could increase user activity in the core search business. This optimism persists despite initial challenges with the AI tool, which garnered internet humor for its inaccuracies. As a result, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% growth in profits for the first quarter, largely driven by AI capabilities. Following this announcement, its stock price surged, pushing its market capitalization above the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s successful first quarter was fueled by the launch of various AI products under its Gemini offering. Recent announcements at the Google I/O developer conference included a futuristic AI assistant capable of visual and verbal interaction through smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
Although Wedbush’s Dan Ives expressed more caution regarding the immediate impact of AI Overviews, he indicated that it could provide a long-term advantage for Search monetization. Ives also noted that AI is positively influencing Google Cloud, forecasting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook and named Google among the firm’s top technology stocks, alongside Uber and Amazon, citing encouragement from developments in general artificial intelligence ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around AI for Google appears favorable, it remains uncertain whether AI will provide sustained growth in sales over time.