Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI initiatives will positively impact its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, attributing potential growth to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They highlighted that the broader application of AI in Google’s services could enhance activity in its core Search business, even though the initial rollout faced challenges, leading to some ridicule online for errors and inaccuracies. They have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by AI advancements, resulting in a surge in its stock price and surpassing the $2 trillion market capitalization, placing it among tech giants like Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed a series of new AI product announcements, including a universal AI assistant capable of interacting through a user’s smart glasses, showcased at the Google I/O conference. The company claims its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about AI Overviews, he noted that it might still support Search monetization over time. Ives also indicated that AI technologies are already benefiting Google Cloud, forecasting a 27% revenue increase from the previous year.
J.P. Morgan analyst Doug Anmuth shared an optimistic view, ranking Google among the top tech stocks alongside Uber and Amazon, and expressed confidence in the progress of Generative AI ahead of Alphabet’s second-quarter earnings. However, Raymond James analyst Josh Beck cautioned that while the current excitement around AI is positive, its long-term effect on Google’s sales remains uncertain.