Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI initiatives will enhance its earnings for the second quarter, as the parent company Alphabet prepares to release its financial results on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing the expected growth to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed confidence in the impact of broader AI transformations within Google’s ecosystem on driving increased activity in search functions. This optimism comes despite some early challenges faced by the AI Overviews tool, which had moments of criticism for inaccuracies. Consequently, their price target for Google’s stock has been revised from $200 to $206.
In the first quarter, Google reported a remarkable 60% increase in profits, partially driven by AI advancements, leading to a significant rise in its stock price and a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This positive first-quarter outcome followed a series of AI product launches, including the unveiling of a universal AI assistant capable of interacting through smart glasses during the Google I/O developer conference. Google claims its new Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews, he noted the potential for these features to incrementally enhance search monetization in the future and recognized the current positive influence of AI on Google Cloud. Similar expectations are held by other analysts, predicting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared the optimistic outlook, naming Google as one of the firm’s top technology stocks alongside Uber and Amazon, highlighting encouragement from GenAI developments ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the AI narrative for Google is currently favorable, the long-term impact on Google’s sales performance remains to be seen.