Analysts from Wedbush, J.P. Morgan, and Bank of America are projecting a positive impact on Google’s second-quarter earnings, driven by the company’s advancements in artificial intelligence (AI). Parent company Alphabet is set to share its earnings results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this to the integration of the Gemini AI tool into Google Cloud and the enhancements in Google Search’s AI Overviews. They expressed optimism about the forthcoming broader implementation of AI features, suggesting that it will likely increase engagement in Google’s core Search business, despite earlier challenges during the initial AI overview rollout that led to some criticisms online. As a result, they have adjusted their stock price target for Google, raising it from $200 to $206.
Earlier this year, Google reported a remarkable 60% rise in profits during the first quarter, largely due to AI contributions, which propelled its stock value and raised its market capitalization above the $2 trillion mark—putting it in the same league as tech giants like Apple, Microsoft, and Nvidia.
In addition, Google has been actively releasing various AI products, particularly through its Gemini AI technology. Among these was a universal AI assistant showcased at the Google I/O developer conference, capable of interacting via smart glasses. Google claims its latest version of Gemini AI outperforms ChatGPT by being 20% faster.
While Wedbush’s Dan Ives holds a more cautious stance regarding the AI Overviews’ impact on Search, he believes it could still foster revenue growth over time. He noted that AI advancements are already positively influencing Google Cloud revenues, predicting a 27% year-over-year growth. J.P. Morgan’s Doug Anmuth also expressed enthusiasm for Google’s AI initiatives, naming it as one of their top tech stock picks alongside Uber and Amazon.
However, analyst Josh Beck from Raymond James cautioned that, while the current AI developments are promising, the long-term effects on Google’s sales remain to be seen.
In summary, Google’s strategic investments and developments in AI appear set to bolster its upcoming earnings report, showcasing the significant potential of AI in enhancing its business model and market position. This optimism reflects a broader shift within the tech industry, emphasizing the transformative role of AI in driving future growth.