Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate a positive impact on Google’s second-quarter earnings, which will be reported after the market closes on Tuesday. They attribute this optimism to Google parent Alphabet’s advancements in artificial intelligence.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts upward, citing the incorporation of Gemini into Google Cloud and the AI Overviews feature in Google Search as catalysts for increased sales. They noted that while the initial rollout of AI Overviews encountered some issues, the broader integration of AI across Google is expected to enhance user engagement in the core Search business. Consequently, 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, largely driven by its AI initiatives. Following this announcement, the company’s stock surged, propelling its market capitalization beyond the $2 trillion mark, placing it alongside Apple, Microsoft, and Nvidia.
The positive results from the first quarter followed a series of new AI product announcements, including a universal AI assistant showcased at the Google I/O developer conference, which aims to integrate advanced capabilities like visual interaction through smart glasses. Google claims its latest Gemini AI model is significantly more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he acknowledged its potential to enhance Search monetization in the long run. He also highlighted that AI is already benefiting Google Cloud, forecasting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth reiterated the positive outlook, ranking Google among its top tech stock picks along with Uber and Amazon, citing ongoing progress in generative AI ahead of the earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable narrative surrounding AI at Google, the long-term effects on sales remain uncertain.