Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its upcoming second-quarter earnings report. The parent company Alphabet is scheduled to announce its earnings on Tuesday after the market closes.
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Recent updates from Bank of America and Wedbush analysts included a raised revenue forecast for Google. Justin Post and Nitin Bansal from Bank of America indicated that the incorporation of Gemini into Google Cloud and the AI Overviews feature in Google Search are expected to enhance sales.
The analysts expressed optimism regarding the growing integration of AI across Google’s platforms, suggesting that a wider deployment of AI overviews would increase activity within the core Search business. This comes despite a rocky start for AI overviews, which initially faced criticism online for generating errors and misinformation. Post and Bansal increased their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit increase for the first quarter, partly attributed to its AI initiatives. This strong performance resulted in a significant rise in its stock price, elevating the company’s market capitalization beyond $2 trillion and placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s positive first-quarter results followed several new product launches related to its Gemini AI capabilities. Notable announcements at Google’s developer conference, Google I/O, included a futuristic universal AI assistant designed to interact through smart glasses. Google claims its latest iteration of Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a slightly more cautious view on AI Overviews compared to Post and Bansal but noted that it could become a benefit for Search monetization over time. He also acknowledged that AI is already contributing to the growth of Google Cloud, with expectations of a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic outlook, labeling Google as one of the firm’s top tech stocks alongside Uber and Amazon. He conveyed that his team is hopeful about the progress of generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment regarding Google’s AI initiatives is positive, the long-term impact of AI on the company’s sales remains uncertain.