Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings report, scheduled for release after the market closes on Tuesday.
Following their assessments, Bank of America analysts Justin Post and Nitin Bansal raised their revenue forecasts, citing the integration of Gemini into Google Cloud and enhanced AI features in Google Search as key drivers for increased sales. They noted their optimism in a research note, stating that the broader rollout of AI overviews is likely to lead to greater user engagement in Google’s core search operations, despite some initial challenges with the tool that led to internet memes about its inaccuracies. As a result, they adjusted Google’s stock price target from $200 to $206.
In April, Google reported a significant profit increase of 60% for the first quarter, largely attributed to its AI initiatives. This impressive performance helped elevate the company’s stock and market capitalization past the $2 trillion milestone, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of new AI product launches as part of Google’s Gemini AI developments, including a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini model outperforms the latest version of ChatGPT by being 20% faster.
While Wedbush analyst Dan Ives expressed caution about the long-term effectiveness of AI Overviews for search monetization, he acknowledged that AI is already benefiting Google Cloud. He expects a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan reinforced the optimistic outlook, naming Google among the investment firm’s top technology stocks, alongside Uber and Amazon, and highlighting the positive advancements in generative AI ahead of the earnings announcement.
Raymond James analyst Josh Beck tempered the enthusiasm by noting that although the current AI trends appear favorable for Google, the sustainability of these sales increases over the long term remains uncertain.