According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, citing the integration of its Gemini AI into Google Cloud and the AI Overviews feature in Google Search as significant contributors to expected sales growth. They noted in a recent research report that they remain optimistic about the expanding role of AI within Google’s ecosystem, anticipating that enhancements in AI Overviews will stimulate more activity in the Search segment, despite initial setbacks with the tool that led to some public ridicule. They have also raised their price target for Google’s stock from $200 to $206.
Google demonstrated impressive profitability earlier this year, reporting a 60% increase in earnings in the first quarter, partially attributed to its AI initiatives. In response, its stock surged, elevating the company’s market capitalization to over $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The company’s robust performance followed a series of AI product launches as part of the Gemini AI lineup, with notable announcements made at the Google I/O developer conference, including an advanced AI assistant capable of interacting via smart glasses. Google asserts that its latest Gemini AI has improved performance, being 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a reserved outlook on AI Overviews, suggesting it might eventually support Search monetization, he acknowledged that AI is already boosting Google Cloud. Ives, along with other Wall Street analysts, expects a substantial 27% growth in Google Cloud revenue compared to the previous year.
Additionally, Doug Anmuth from J.P. Morgan highlighted Google’s strong position, identifying it as one of the firm’s top technology stock picks alongside Uber and Amazon, citing promising developments in generative AI leading up to Alphabet’s earnings announcement.
Conversely, Raymond James analyst Josh Beck cautioned that despite the positive narrative surrounding Google’s AI endeavors, it remains uncertain whether these innovations will translate to sustainable long-term sales growth.