Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, will disclose its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will positively impact sales.
In a recent research note, they expressed confidence in the increasing use of AI across Google’s platforms. They noted that a wider deployment of AI overviews could lead to increased activity in the core Search business, despite some initial difficulties with AI overviews that generated humorous flubs online. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, largely attributed to AI initiatives. This financial success caused its stock price to skyrocket, elevating its market capitalization to over $2 trillion, joining industry giants like Apple, Microsoft, and Nvidia.
Google’s impressive performance followed months of rolling out new AI products under its Gemini initiative. Notable announcements at the Google I/O developer conference included a future universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI operates 20% faster than the latest iteration of ChatGPT.
Dan Ives from Wedbush was more reserved in his optimism about AI Overviews compared to Post and Bansal but mentioned in a recent note that it could become a beneficial factor for Search monetization in the long run. Ives also noted that AI is already positively impacting Google Cloud and predicts a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan expressed similar positive views, identifying Google as one of the firm’s top technology stock picks alongside Uber and Amazon, and highlighted the advancements in generative AI ahead of Alphabet’s upcoming earnings report.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current outlook for Google’s AI initiatives appears favorable, the long-term impact on driving sales remains uncertain.