Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will boost its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google. They attribute this adjustment to the integration of Gemini into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, the analysts expressed optimism regarding the expanding AI integrations within Google’s ecosystem, suggesting that a wider rollout of AI overviews could lead to increased activity in the core Search business. This prediction comes despite earlier issues with AI overviews, which faced criticism for producing inaccurate information. Following these updates, Post and Bansal adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable profit increase of 60% for the first quarter, partially driven by AI initiatives, leading to a significant rise in its stock price and elevating its market capitalization above $2 trillion, alongside other tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results were supported by a series of artificial intelligence product launches tied to its Gemini AI. During the recent Google I/O developer conference, the company unveiled a new universal AI assistant capable of interacting with users through smart glasses, claiming its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews’ immediate impact on search revenue, he noted that these features could provide a long-term advantage for monetization. Ives also pointed out that the AI sector is already positively influencing Google Cloud, and he anticipated a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth reinforced the positive outlook, citing Google as one of his firm’s top tech stock picks, along with Uber and Amazon, while expressing encouragement over the progress of generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI developments appear promising, the long-term impact of AI on Google’s sales remains uncertain.