Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings report, which is set to be released after market hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal increased their revenue forecasts for Google, citing the successful integration of Gemini into Google Cloud and the launch of AI overviews in Google Search as key factors that will enhance sales. They expressed optimism about the expanding use of AI across Google’s suite of services, suggesting that enhanced AI features will lead to greater user engagement with the core Search business. Despite some initial challenges with the AI overview rollout, which faced criticisms for inaccuracies, they raised their price target for Google’s stock from $200 to $206.
In April, Google experienced a remarkable 60% profit increase in the first quarter, largely fueled by its AI initiatives, resulting in its market valuation exceeding $2 trillion, alongside tech giants such as Apple, Microsoft, and Nvidia. The company’s strong quarterly outcomes followed extensive new AI product launches, highlighting the capabilities of its Gemini AI, which Google claims operates 20% faster than the latest version of ChatGPT.
Although Wedbush analyst Dan Ives expressed some caution regarding the long-term effects of AI overviews on Search monetization, he noted that AI is already positively influencing Google Cloud sales. According to him, analysts anticipate a 27% rise in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similar positive outlook, recently designating Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressed encouragement over the progress in generative AI as the company approaches its second-quarter earnings release. However, Raymond James analyst Josh Beck cautioned that while the current perception of AI’s impact on Google is favorable, its long-term effect on sales remains uncertain.