Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, attributing the predicted increase to the integration of Gemini into Google Cloud and new AI features in Google Search. They expressed optimism about the AI enhancements across Google’s ecosystem, suggesting that the rollout of AI overviews will stimulate more activity in the Search business. Despite some early challenges with the AI overviews, which led to humorous criticism online due to errors and inaccuracies, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly driven by AI advancements. This surge caused the company’s stock price to rise, elevating its market capitalization to over $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
Google has introduced numerous new AI products as part of its Gemini offerings, with its recent developer conference, Google I/O, showcasing a futuristic universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews, he acknowledged their potential to support Search monetization in the long run. He also noted that AI is already positively impacting Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth echoed the optimistic outlook, naming Google among its top tech stock picks alongside Uber and Amazon, and expressing enthusiasm for the company’s progress in generative AI ahead of the earnings report.
However, Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding AI is favorable, the long-term impact of AI on Google’s sales remains uncertain.