Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s foray into artificial intelligence will enhance its second-quarter earnings, as Alphabet, Google’s parent company, prepares to release its earnings report on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have adjusted their revenue forecasts for Google upwards, suggesting that the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search will boost sales. They expressed optimism about the expanding AI features across Google’s platforms and anticipate that the wider release of AI Overviews will increase activity in the core Search business, despite early challenges with the tool that led to online criticism for incorrect outputs. Consequently, they have revised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to its AI initiatives, which resulted in a significant rise in its stock price and pushed its market capitalization above $2 trillion, joining giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed numerous launches of new AI products as part of its Gemini AI suite. Among the highlights from its recent developer conference, Google unveiled plans for a universal AI assistant capable of visual and verbal interaction through smart glasses, claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives was somewhat cautious regarding the immediate impact of AI Overviews, he indicated that these features might eventually contribute positively to Search monetization. He also noted that AI is already enhancing Google Cloud services and predicted a 27% year-over-year increase in Cloud revenue for the company.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic view, listing Google as one of the firm’s top tech stocks alongside Uber and Amazon due to the encouraging advancements in generative AI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google looks promising, it remains uncertain whether these developments will sustain long-term sales growth for the company.