Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to unveil its earnings report on Tuesday.
The analysts from Bank of America, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google. They anticipate that the incorporation of the Gemini AI into Google Cloud and the introduction of AI Overviews within Google Search will contribute to increased sales. In a recent research note, they expressed optimism about the expanding AI integrations across Google’s ecosystem and suggested that a broader launch of AI Overviews could lead to heightened engagement in the core Search business, despite initial challenges when the feature faced criticism for inaccuracies. They have raised their price target for Google’s stock from $200 to $206.
Google reported a remarkable 60% rise in profits in the first quarter of the year, largely thanks to its AI initiatives. This surge helped elevate its stock price, propelling its market capitalization beyond $2 trillion, aligning it with industry giants such as Apple, Microsoft, and Nvidia.
Following months of releasing new AI products under its Gemini platform, Google’s positive earnings came after its developer conference, Google I/O, where it unveiled a future AI assistant capable of interacting through smart glasses. Google touted that the latest version of Gemini AI outperforms the newest ChatGPT by 20% in speed.
While Dan Ives from Wedbush expressed more caution regarding AI Overviews compared to Post and Bansal, he indicated that it could eventually support Search monetization. Ives noted that AI is already benefiting Google Cloud and anticipates a 27% rise in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar upbeat outlook and listed Google as one of their top technology stock picks, along with Uber and Amazon. He stated that his team is optimistic about the progress of generative AI ahead of Alphabet’s earnings report.
However, analyst Josh Beck from Raymond James cautioned that, despite the current optimism surrounding AI’s impact on Google, it remains uncertain whether these advancements will yield sustained sales growth in the long term.