Google’s efforts in artificial intelligence are anticipated to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company Alphabet is expected to disclose its earnings after market hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, citing the integration of the Gemini AI platform into Google Cloud and AI Overviews within Google Search as key factors in driving sales. They expressed optimism about the increasing use of AI across Google’s ecosystem, suggesting that a wider deployment of AI overviews could stimulate greater engagement with the core Search business, despite some initial setbacks in the rollout that drew comedic reactions online. As a result of these insights, they have raised their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable 60% increase in profits, significantly supported by AI developments, which contributed to its stock price surge and elevated market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s robust performance followed the debut of various new AI products as part of the Gemini AI initiative. At the recent Google I/O developer conference, Google unveiled a forward-looking AI assistant capable of interacting through smart glasses. Furthermore, Google claims that its latest version of Gemini AI operates 20% faster than the most recent iteration of ChatGPT.
Though Wedbush’s Dan Ives expressed a more cautious view on AI Overviews, he acknowledged that it might provide a supportive force for Search monetization in the future. At the same time, he noted that AI has already made a positive impact on Google Cloud, with predictions of a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared an optimistic perspective, naming Google among the firm’s top technology stock picks alongside Uber and Amazon, and highlighting the encouraging progress in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI momentum for Google appears favorable, it remains to be seen whether AI will drive sustained sales growth in the long term.