Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s investment in artificial intelligence will lead to a favorable report for its second-quarter earnings, which are expected after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini technology into Google Cloud and the AI Overviews feature in Google Search as significant contributors to increased sales. They expressed optimism about AI’s impact on Google’s ecosystem, noting that these developments are likely to enhance activity in the core Search business, despite some initial difficulties with the AI Overviews, which garnered some online ridicule for mistakes. Consequently, they raised their stock price target for Google from $200 to $206.
In its first-quarter earnings report in April, Google announced a remarkable 60% increase in profits, largely attributed to AI advancements, which also led to a significant rise in its stock price, surpassing a market capitalization of $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of AI product announcements from Google, particularly during its Google I/O developer conference, where it unveiled a futuristic universal AI assistant that can interact through users’ smart glasses. Google claims its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews, he noted that they could potentially aid Search monetization in the long run. He also highlighted that AI is already positively affecting Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan mirrored the overall positive outlook, identifying Google as one of the firm’s top tech stock picks, along with Uber and Amazon, and expressed encouragement regarding the progress of generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current perspective on AI’s role in Google’s performance is upbeat, its long-term impact on sales remains uncertain.