Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, with Alphabet scheduled to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key factors for driving sales. They expressed optimism about the ongoing AI enhancements across Google’s ecosystem, stating that a broader implementation of AI Overviews is likely to increase activity in the core Search business. Despite some early challenges with the AI Overviews being criticized for inaccuracies, they increased their price target for Google shares from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, credited partly to its AI initiatives, which contributed to its stock price surge and pushed its market valuation above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
In April, Google unveiled several new AI developments, showcasing its Gemini AI technology, which it claims is 20% faster than the latest version of ChatGPT. The latest updates, revealed during the Google I/O developer conference, included an advanced AI assistant capable of interacting through smart glasses.
While Wedbush’s Dan Ives expressed a more cautious view on the immediate impact of AI Overviews compared to Post and Bansal, he noted that it could serve as a long-term asset for Search monetization. Additionally, he indicated that AI is already contributing positively to Google Cloud’s performance, with expectations of a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar upbeat outlook and listed Google among their top tech stock picks, alongside Uber and Amazon, highlighting confidence in Generative AI advancements ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, while the current AI developments at Google appear promising, the long-term effects on the company’s sales remain uncertain.