Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s recent advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
Both Bank of America and Wedbush have increased their revenue forecasts for Google, highlighting that the integration of Gemini into Google Cloud and the introduction of AI Overviews within Google Search are expected to drive sales growth. Analysts Justin Post and Nitin Bansal noted in a recent research note that despite facing some initial challenges during the rollout of AI Overviews – which attracted online criticism for inaccuracies – they remain optimistic about the overall positive impact of AI features on the Search business. Consequently, they adjusted their price target for Google’s stocks from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly attributed to its AI initiatives. This impressive performance led to a rise in its stock price and elevated its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s positive results came on the heels of extensive launches of new AI products as part of its Gemini AI suite. Notably, during the Google I/O developer conference, the company introduced a universal AI assistant capable of interacting through smart glasses, claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he acknowledged that they could eventually benefit Search monetization. Ives also pointed out that AI is already enhancing Google Cloud services, with expectations of a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similarly optimistic view, ranking Google among the top technology stocks alongside Uber and Amazon, and expressing enthusiasm for the progress in Generative AI ahead of Alphabet’s earnings release.
However, Josh Beck from Raymond James cautioned that although the current narrative surrounding AI for Google is positive, it remains uncertain if this will result in sustained sales growth over the long term.