Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s investments in artificial intelligence will positively influence its second-quarter earnings. Alphabet, Google’s parent company, is expected to release its earnings report after trading closes on Tuesday.
Recent assessments have led Bank of America and Wedbush to upgrade their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI into Google Cloud and new AI features in Google Search will boost sales significantly. They expressed optimism about the ongoing AI enhancements within Google’s framework, stating that the wider rollout of AI features could stimulate increased engagement in the Search division. Despite some initial challenges with the AI features, which faced criticism online for inaccuracies, Post and Bansal increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, aided by its AI initiatives, which resulted in a surge in stock price and raised its market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
Google’s strong financial performance followed extensive AI product releases as part of its Gemini initiative, with highlights from the recent Google I/O conference involving the introduction of a futuristic AI assistant capable of interacting through smart glasses. Google has claimed that its latest Gemini AI can operate 20% faster than the newest version of ChatGPT.
Although Dan Ives from Wedbush maintained a cautious outlook on the AI Overviews feature compared to his counterparts, he acknowledged that it could eventually support Search monetization. He noted that AI is already contributing positively to Google Cloud’s performance, anticipating a 27% revenue increase from the previous year.
Doug Anmuth from J.P. Morgan shared a similar positive perspective, naming Google as one of his firm’s top technology stock picks, alongside Uber and Amazon, while emphasizing their anticipation of advancements in Generative AI prior to Alphabet’s upcoming earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative around AI is favorable for Google, it remains uncertain whether these technologies will lead to sustained long-term sales growth.