Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings in the second quarter. Alphabet, Google’s parent company, is expected to announce its earnings results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts upward for Google, attributing the expected growth to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism in a research note, stating that the AI enhancements will likely increase activity within the main Search business, despite initial challenges faced during the rollout of AI Overviews.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly boosted by its AI innovations. This surge in earnings led to a spike in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of industry titans like Apple, Microsoft, and Nvidia.
The first quarter’s strong performance came on the heels of numerous new AI product launches, particularly from its Gemini AI program. Among its latest innovations presented at the Google I/O development conference was a universal AI assistant designed to interact through users’ smart glasses. Google also claims that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives holds a more cautious view on the long-term impact of AI Overviews, he noted their potential to benefit Search monetization eventually. He also indicated that AI is already contributing positively to Google Cloud, predicting a 27% revenue increase in that sector compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, naming Google as one of their preferred technology stocks, alongside Uber and Amazon. He mentioned the team’s encouragement from the progress made in generative AI ahead of Alphabet’s anticipated earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, its long-term effect on driving sales growth remains uncertain.