Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings results on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google upwards. They attribute this positive outlook to the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search, which they believe will boost sales.
In a recent research note, they expressed optimism regarding the ongoing AI integrations within Google’s various platforms. They anticipate that a more extensive rollout of AI overviews will result in increased engagement in Google’s core Search business, even though the initial phase of this feature faced challenges and became the subject of online mockery due to inaccuracies. Following this analysis, Post and Bansal raised their price projection for Google’s stock from $200 to $206.
In April, Google reported a startling 60% profit increase in the first quarter, in part due to AI developments. This surge in profit led to a significant rise in its stock price, propelling the company’s market valuation beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s remarkable first-quarter results came after a series of AI product launches as part of its Gemini AI program. Among the announcements at the recent Google I/O developer conference was a universal AI assistant capable of visual interaction through smart glasses. According to Google, its new Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush was slightly more cautious regarding AI Overviews than Post and Bansal but noted that it could potentially benefit Search monetization over time. Ives also highlighted that AI is already positively impacting Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan shared a similarly optimistic view, naming Google as one of the firm’s top tech investments alongside Uber and Amazon, citing encouragement from advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current outlook for Google’s AI initiatives is promising, it remains uncertain whether AI will maintain its capacity to drive long-term sales growth for the company.