Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI initiatives are likely to contribute positively to its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google upwards. Analysts Justin Post and Nitin Bansal from Bank of America are optimistic about the integration of Gemini into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, they highlighted the potential of AI integrations across Google’s platform, suggesting that a wider implementation of AI Overviews could boost engagement in the Search division, despite some early challenges that led to internet jokes about the tool’s inaccuracies. They revised their stock price target for Google from $200 to $206.
In its first quarter, Google reported a remarkable 60% increase in profits, largely attributed to its AI advancements, which propelled its stock price and elevated its market value beyond $2 trillion, placing it alongside tech giants Apple, Microsoft, and Nvidia.
The positive outcomes from the first quarter followed several new AI product launches under the Gemini initiative. One notable feature showcased at the Google I/O developer conference was a universal AI assistant designed to interact through a user’s smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Wedbush’s Dan Ives expressed a more cautious stance regarding AI Overviews compared to his peers but acknowledged that it could eventually aid in Search monetization. He also remarked that AI is significantly benefiting Google Cloud, predicting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth affirmed the positive outlook, naming Google as one of the firm’s top tech stock picks, along with Uber and Amazon, as they express confidence in the progress of generative AI leading up to Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term impact on sales remains uncertain.