Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements will positively impact its second-quarter earnings, as parent company Alphabet prepares to announce its financial results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal upgraded their revenue forecasts for Google, highlighting the integration of Gemini into Google Cloud and AI Overviews in Google Search as key catalysts for increased sales. They expressed optimism in a recent research note, stating, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite some challenges faced during the initial rollout of AI overviews, which attracted criticism for producing inaccuracies. As a result, they adjusted 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, partly fueled by AI developments. This strong performance pushed the company’s stock price up, elevating its market capitalization beyond the $2 trillion threshold, alongside Apple, Microsoft, and Nvidia.
The company’s impressive results followed months of launching new AI products, particularly under its Gemini AI initiative. At the recent Google I/O developer conference, Google introduced innovative tools, including a universal AI assistant designed for smart glasses, claiming its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, suggesting they may benefit Search monetization over time, he acknowledged AI’s current positive impact on Google Cloud. Like other industry analysts, he anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth reflected a similar optimistic outlook, identifying Google as one of the firm’s top tech stocks, alongside Uber and Amazon, due to encouraging developments in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the present AI narrative for Google is favorable, it remains uncertain whether AI will sustain long-term sales growth for the company.