Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, attributing much of the expected success to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to report its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, pointing to the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search as major contributors to increased sales. They expressed confidence in the potential for AI to enhance user engagement in Google’s core Search business, despite some initial challenges that led to online mockery of the AI tool’s performance. Their price target for Google’s stock has been elevated from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, driven in part by AI innovations. This performance resulted in a significant rise in its stock price, propelling its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s successful first-quarter results followed a series of new AI product launches, particularly under the Gemini AI branding. During the recent Google I/O developer conference, the company showcased a future AI assistant capable of interacting through smart glasses, claiming that its latest Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the AI Overviews feature, he noted its potential to positively impact Search monetization over time. He also emphasized the existing benefits that AI is yielding for Google Cloud, anticipating a 27% revenue growth in that sector compared to the previous year.
J.P. Morgan’s Doug Anmuth reiterated the optimistic outlook on Google, highlighting its position as one of the firm’s top tech stocks, alongside Uber and Amazon. He conveyed encouragement about the progress in Generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is positive, the long-term impact on sales growth remains uncertain.