Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s artificial intelligence initiatives are likely to enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing the expected sales boost to the implementation of Gemini in Google Cloud and AI Overviews in Google Search. They expressed optimism about AI integration across Google’s ecosystem and anticipate that a wider roll-out of AI overviews will encourage greater engagement in the core Search business, despite initial challenges with the rollout. They have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, partly driven by AI, which led to a significant rise in its stock price and pushed the company’s market valuation beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed several AI product launches as part of Google’s Gemini offerings. At the recent Google I/O developer conference, the company unveiled a next-generation AI assistant designed to interact through users’ smart glasses. Google claims its updated Gemini AI is 20% quicker than the latest version of ChatGPT.
While Dan Ives from Wedbush expressed a more cautious view on AI Overviews, he suggested that it could eventually support Search monetization. He also noted that AI is already benefiting Google Cloud, predicting a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared similar positive sentiments, naming Google among its top tech stocks alongside Uber and Amazon and expressing enthusiasm for the progress of generative AI ahead of Alphabet’s second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that while current narratives surrounding Google’s AI are favorable, it remains uncertain whether AI will lead to sustained sales growth for the company in the long run.