Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings when the company reports results after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, highlighting that the incorporation of the Gemini AI system into Google Cloud and the new AI Overviews feature in Google Search is expected to drive sales. They noted that despite initial challenges with AI Overviews, which faced criticism for inaccuracies, they remain optimistic about the broader implementation of AI enhancing user engagement in Google’s core Search operations. As a result, they have raised their price target for Google’s stock from $200 to $206.
In its first-quarter earnings report in April, Google experienced a notable 60% increase in profits, attributed in part to its AI initiatives, resulting in a surge in stock price and a market capitalization exceeding $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive early-year performance is linked to a series of new AI product launches, including advancements unveiled at the Google I/O developer conference. These innovations feature a forward-looking AI assistant designed for smart glasses, and the latest Gemini AI is reported to operate 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance on the potential of AI Overviews, he acknowledged that the feature might eventually support enhanced monetization of Search. He also noted that AI is already having a beneficial impact on Google Cloud, predicting a 27% revenue increase in that segment compared to the previous year.
J.P. Morgan’s Doug Anmuth expressed similar optimism, naming Google as a top tech stock, alongside Uber and Amazon, and citing encouraging developments in Generative AI ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current perception of AI’s impact on Google is largely positive, the long-term effects on sales remain uncertain.