According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings. The parent company Alphabet is poised to announce its earnings after the market closes 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 platform into Google Cloud and AI Overviews in Google Search as key drivers for sales growth. They expressed optimism about the growing presence of AI within Google’s ecosystem and believe that broader adoption of AI Overviews will enhance engagement in the Search segment. Despite challenges during the initial rollout of AI Overviews—where users highlighted inaccuracies—the analysts raised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, partly attributed to AI advancements, leading to a surge in its stock price and elevating its market capitalization beyond the $2 trillion mark, placing it among tech giants like Apple, Microsoft, and Nvidia.
Following a series of AI product launches under the Gemini brand, Google showcased its latest innovations at the Google I/O developer conference, including a next-generation AI assistant capable of interacting through smart glasses. Google claims its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he noted that it could eventually benefit Search profitability. He also stated that AI is already positively influencing Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
Sharing a similar positive outlook, J.P. Morgan’s Doug Anmuth identified Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and noted his team’s enthusiasm regarding the advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI is favorable, it remains uncertain whether AI will lead to sustained long-term sales growth.