Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s latest advances in artificial intelligence will positively impact its earnings for the second quarter, as Alphabet prepares to release its financial results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key factors for sales growth. They expressed optimism about the broader rollout of AI features driving additional activity in Google’s core Search business, despite some initial issues with AI Overviews that had generated humorous criticisms online. Consequently, Post and Bansal raised their price target for Google’s stock from $200 to $206.
In its first quarter earnings report in April, Google reported a remarkable 60% profit increase, largely attributed to its AI developments, which propelled its stock price and market capitalization to over $2 trillion, thus joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong earnings were bolstered by a series of AI product launches associated with its Gemini offerings, including an announcement at its Google I/O conference about a future AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI version outperforms existing tools, being 20% faster than ChatGPT.
While Wedbush’s Dan Ives is more cautious about the impact of AI Overviews compared to his peers, he acknowledges its potential as a future benefit for monetizing Search. He also noted that AI is already enhancing Google Cloud, projecting a 27% revenue increase for the cloud services from the previous year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive view, designating Google as one of the investment firm’s top tech stocks alongside Uber and Amazon, citing encouraging advancements in generative AI ahead of the upcoming earnings report. Conversely, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term effects on sales remain uncertain.