Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing expected sales growth to the integration of AI features like Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism regarding the positive impact of AI features on user engagement in core Search services, despite an uneven initial rollout that garnered some online ridicule due to inaccuracies. Their price target for Google shares has been adjusted upward from $200 to $206.
In its first-quarter earnings report released in April, Google reported a remarkable 60% increase in profits, largely attributed to AI initiatives, leading to a spike in its stock price and a market valuation exceeding $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance came on the heels of numerous AI product launches stemming from its Gemini AI project, including an innovative universal AI assistant showcased at its Google I/O developer conference. The company claims its latest AI iteration is 20% faster than its closest competitor, ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the long-term effectiveness of AI Overviews, he acknowledged that AI is currently benefiting Google Cloud and projected a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan also shared an optimistic outlook, naming Google alongside Uber and Amazon as one of his firm’s top tech stock picks, citing encouraging developments in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that the positive AI narrative surrounding Google needs to be evaluated over the long term to determine its impact on sales growth.