Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with Alphabet set to announce its results after trading hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, asserting that the integration of Gemini into Google Cloud, along with new AI features in Google Search, will significantly enhance sales. In their research note, they expressed optimism regarding the AI integrations across Google’s platform, stating that a wider implementation of AI overviews is likely to increase user engagement within the core Search business. Despite some initial challenges and backlash regarding the AI overviews, they have revised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, propelled largely by its AI strategies. This impressive performance led to a surge in stock prices, bringing the company’s market valuation above $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The successful first quarter followed a series of new AI product launches from Google, particularly its Gemini AI offerings. At its recent Google I/O developer conference, Google revealed a universal AI assistant capable of interacting with users via smart glasses. Furthermore, the company claims that its Gemini AI is 20% faster compared to the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on the AI Overviews than his counterparts, indicating that these tools could potentially benefit Search monetization over the long term. He noted that AI is already contributing positively to Google Cloud, forecasting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook, labeling Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing optimism about advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is favorable, it remains uncertain how much AI will truly contribute to long-term sales growth for the company.