Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its performance in the upcoming second-quarter earnings report, set to be announced after the closing bell on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the successful integration of the Gemini platform into Google Cloud and the implementation of AI Overviews in Google Search as key drivers for sales growth.
In a recent research note, they expressed optimism regarding the expanding AI features within Google’s ecosystem, believing that a wider deployment of AI Overviews will boost engagement in Google’s main Search operations. This optimism persists despite some challenges during the initial rollout of AI Overviews, which garnered some criticism online due to errors and inaccuracies. The analysts have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% surge in profits for the first quarter, partly attributed to its AI initiatives, which led to a significant rise in its stock price and propelled the company’s market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed a series of AI product launches as part of its Gemini offerings. At its recent developer conference, Google showcased a groundbreaking AI assistant that could interact verbally and visually through a user’s smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Dan Ives from Wedbush is somewhat more cautious regarding the impact of AI Overviews on immediate sales, he noted in a Monday research note that they could become beneficial for Search monetization over time. He also highlighted that AI is already enhancing Google Cloud’s performance, with expectations of a 27% revenue increase in Cloud services compared to the previous year.
Doug Anmuth from J.P. Morgan echoed the positive outlook, recently naming Google as one of the firm’s top technology stocks alongside Uber and Amazon, expressing encouragement regarding the progress in generative AI ahead of Alphabet’s second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI developments is favorable, the long-term impact on sales remains uncertain.