Google’s advancements in artificial intelligence are anticipated to enhance its earnings in the second quarter, as noted by analysts from Wedbush, J.P. Morgan, and Bank of America. The tech giant’s parent company, Alphabet, is scheduled to release its earnings report on Tuesday.
Analysts from Bank of America, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, attributing potential sales growth to the integration of the company’s AI tool, Gemini, into Google Cloud and AI Overviews within Google Search. They expressed optimism about the impact of these AI enhancements on search business activity, despite some early issues with the rollout of AI Overviews that drew criticism online. As a result, they have adjusted their price target for Google stock from $200 to $206.
In April, Google announced a remarkable 60% rise in profits for the first quarter, largely credited to its AI initiatives. This surge in profitability led to a significant increase in its stock price, pushing the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s impressive first-quarter results followed a series of AI product launches under the Gemini AI initiative. Recent highlights from Google I/O, the company’s developer conference, included an innovative AI assistant capable of interacting through a user’s smart glasses, and the latest iteration of Gemini AI, which Google claims is 20% faster than the newest ChatGPT.
While Wedbush analyst Dan Ives is somewhat less optimistic about the immediate effects of AI Overviews, he believes they may contribute positively to search monetization in the long run. He also pointed out that AI is already increasing revenue for Google Cloud, estimating a 27% growth in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, designating Google as one of the firm’s top technology stock picks alongside Uber and Amazon, citing excitement about advancements in generative AI as Alphabet approaches its earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is favorable, the long-term impact on the company’s sales remains uncertain.