Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to report results after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, noting that the company’s integration of its Gemini AI into Google Cloud and AI Overviews in Google Search is likely to drive sales growth. They maintain a positive outlook on Google’s AI initiatives across its platform, asserting that a wider adoption of AI Overviews could increase engagement in the core Search segment. Despite some initial issues with the rollout of AI Overviews, which faced criticism online for errors, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% profit surge in the first quarter, largely attributed to its AI developments, resulting in a stock price increase that pushed its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results came after several months of launching new AI products tied to its Gemini AI initiative. At its recent developer conference, Google I/O, the company unveiled plans for a universal AI assistant that could interact through smart glasses. Google’s latest Gemini AI claims to be 20% faster than the latest ChatGPT.
However, Wedbush’s Dan Ives expressed more caution regarding the AI Overviews, stating that while it may benefit Search monetization over time, it is not as strong a positive signal as others suggest. Ives also indicated that AI is already having a favorable impact on Google Cloud, and like other analysts, he anticipates a 27% revenue increase for Google Cloud compared to last year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic view, including Google as one of the firm’s top technology picks alongside Uber and Amazon, citing his team’s encouragement from the progress in generative AI ahead of Alphabet’s earnings report. Meanwhile, Raymond James analyst Josh Beck cautioned that despite the encouraging current sentiment around Google’s AI, the long-term effects on sales remain uncertain.