Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America and Wedbush analysts have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will positively impact sales.
They expressed, “We remain optimistic about the increasing AI integrations across Google’s ecosystem and believe a broader rollout of AI overviews will stimulate greater activity in the core Search business.” This optimism persists even in light of early challenges during the rollout of AI Overviews, which faced criticism online for incorrect outputs. Post and Bansal have adjusted their stock price target for Google from $200 to $206.
In April, Google reported an impressive 60% rise in profits for the first quarter, largely attributed to AI, which led to a significant increase in its stock price and a market capitalization exceeding $2 trillion, aligning it with industry giants Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed months of launching new AI products under its Gemini program. Highlights from its recent developer conference, Google I/O, included the unveiling of a universal AI assistant capable of interacting through smart glasses, with Google claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance toward AI Overviews compared to Post and Bansal, he noted that these features “may provide a tailwind for Search monetization over time.” Ives also emphasized the positive impact AI is having on Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared similar positive views and designated Google as one of their top technology stock picks, alongside Uber and Amazon, citing encouragement from the progress in generative AI ahead of Alphabet’s upcoming earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term impact of AI on the company’s sales remains uncertain.