Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s adoption of artificial intelligence will positively impact its earnings for the second quarter. Google’s parent company, Alphabet, is preparing to share its earnings report following the market close on Tuesday.
Updated revenue forecasts for Google have been issued by Bank of America’s Justin Post and Nitin Bansal, who attribute this optimism to the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search. They express confidence that these features will enhance sales activity, despite some initial challenges when the AI Overviews were first rolled out, which led to some humorous mishaps online. Consequently, they have increased their stock price target for Google from $200 to $206.
In the first quarter, Google enjoyed a remarkable 60% profit increase, largely due to AI innovations, driving its stock price and elevating its market cap above $2 trillion, positioning it alongside Apple, Microsoft, and Nvidia.
This strong performance came on the heels of a series of AI product launches as part of Google’s Gemini initiative. During its Google I/O developer conference, the company showcased a futuristic universal AI assistant capable of interacting through smart glasses, claiming that the latest version of Gemini AI is 20% faster than the latest ChatGPT.
While Dan Ives of Wedbush is somewhat cautious about the immediate impacts of AI Overviews, he noted that these tools could eventually enhance revenue from Search. He also emphasized the positive contribution of AI to Google Cloud, projecting a 27% revenue increase for the Cloud segment compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similarly optimistic view, naming Google among its top tech stock picks, alongside Uber and Amazon, highlighting the promising advancements in generative AI ahead of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that while the current view of Google’s AI efforts is favorable, the long-term influence of AI on the company’s sales remains uncertain.