Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact the company’s second-quarter earnings, with Alphabet set to announce its earnings after the market closes on Tuesday.
Research from Bank of America, specifically by analysts Justin Post and Nitin Bansal, indicates an upward revision in revenue forecasts for Google. They believe the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search will enhance sales significantly.
In a recent research note, the analysts expressed optimism about the impact of AI across Google’s ecosystem, stating that the wider implementation of AI overviews is likely to elevate user engagement in their core Search business. This comes despite some initial challenges faced during the rollout, where the AI tool attracted criticism for generating errors. Consequently, Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely attributed to its AI initiatives. This robust performance led to a significant increase in the company’s stock price, bringing its market capitalization to over $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results were fueled by a series of new AI product launches, particularly within its Gemini AI lineup. During the Google I/O developer conference, the company unveiled an advanced AI assistant capable of interfacing with users through smart glasses. Google also claims its latest Gemini AI is 20% faster than the newest version of ChatGPT.
Dan Ives from Wedbush offered a more cautious perspective regarding AI Overviews compared to his peers Post and Bansal, noting that while it has potential for improving Search monetization in the long run, its immediate impact remains uncertain. However, he acknowledged that AI is already benefiting Google Cloud, forecasting a 27% increase in Cloud revenue year-over-year, aligning with other Wall Street analysts’ expectations.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook, designating Google as one of the investment firm’s top tech stocks, alongside Uber and Amazon. He expressed confidence in the progress of General AI ahead of Alphabet’s upcoming earnings report.
Nonetheless, analyst Josh Beck from Raymond James cautioned that while the current sentiment surrounding AI at Google appears favorable, its long-term influence on sales remains to be seen.