Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is set to unveil its earnings report after the market closes on Tuesday.
Both Bank of America’s Justin Post and Nitin Bansal have revised their revenue forecasts for Google upward, citing the integration of Gemini into Google Cloud and enhancements in AI functionalities on Google Search as key drivers for increased sales. They expressed optimism about the broad application of AI features across Google’s platform, which they believe will elevate engagement in the core Search business, despite some initial challenges that led to humorous social media reactions regarding AI overview inaccuracies. Consequently, they elevated their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, largely attributed to its AI innovations. This performance led to a significant rise in its stock price and marked the company’s market capitalization exceeding $2 trillion, positioning it alongside Apple, Microsoft, and Nvidia.
The positive first-quarter results came after months of launching new AI products under the Gemini brand. Notably, during the Google I/O developer conference, the company showcased a future universal AI assistant capable of interacting through users’ smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the AI Overviews feature, he acknowledged its potential to enhance search monetization over time. Ives also noted that AI technology is already benefiting Google Cloud, with expectations of a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, recognizing Google as one of the investment firm’s top technology stocks, alongside Uber and Amazon. He highlighted his team’s optimism regarding the progress of generative AI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative about Google’s AI is favorable, the long-term impact of AI on the company’s sales remains uncertain.