Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s investments in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, attributing the increase to the integration of the Gemini AI into Google Cloud and the AI Overviews in Google Search, which they believe will enhance sales performance. They highlighted that, despite initial challenges during the rollout of AI Overviews, which led to some humorous internet reactions due to errors and inaccuracies, they remain confident that these AI enhancements will ultimately boost engagement within the core Search business. Accordingly, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, aided by its AI advancements. Following this announcement, the company’s stock surged, helping it reach a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results came after multiple AI product launches, including the Gemini AI features introduced during its developer conference, Google I/O. Notably, the latest iteration of Gemini AI has been claimed by Google to be 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives was more cautious regarding the AI Overviews’ immediate impact, he suggested that over time, these features could bolster monetization of the Search platform. He also noted that AI is already benefiting Google Cloud, projecting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared a similar positive outlook, identifying Google as one of the top technology stocks, alongside Uber and Amazon, while expressing optimism about the advancements in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding Google’s AI efforts is encouraging, the long-term influence of AI on the company’s sales remains uncertain.