Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are poised to enhance its earnings in the second quarter. Alphabet, Google’s parent company, will disclose its earnings report after market close on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute the anticipated sales growth to the integration of Gemini within Google Cloud and AI Overviews in Google Search.
They noted in a recent research update, “We remain positive on growing AI integrations across Google’s ecosystem and believe that a wider implementation of AI overviews will stimulate increased activity in the core Search business,” despite some initial issues during the AI overviews rollout, which was subject to internet ridicule for inaccuracies. As a result, Post and Bansal have revised their price target for Google’s stock from $200 to $206.
Earlier this year, Google announced a remarkable 60% surge in profits for the first quarter, largely driven by its AI offerings, leading to a significant increase in stock price and elevating the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s successful first-quarter earnings followed a series of new AI product launches under its Gemini AI initiative. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting via users’ smart glasses. Google claims that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives is somewhat cautious about the long-term effectiveness of AI Overviews, he mentioned in a recent note that they “may become a tailwind for Search monetization over time.” He also pointed out that AI is already making a positive impact on Google Cloud, with a consensus on Wall Street predicting a 27% revenue increase for Cloud services compared to last year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, tagging Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing optimism about the progress in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current favorable narrative surrounding AI, it remains uncertain whether these advancements will translate into sustained sales growth for Google in the long run.