Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, as the company prepares to release its earnings report after the market closes on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google, citing the positive impact of the integration of AI features like Gemini into Google Cloud and AI Overviews in Google Search. Analysts Justin Post and Nitin Bansal expressed optimism over the growing AI capabilities across Google’s ecosystem, suggesting that the wider implementation of AI overviews could stimulate more activity in Google’s core Search business. Their price target for Google’s stock was raised from $200 to $206, even in light of initial setbacks during the rollout of AI overviews, which faced criticism for inaccuracies.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by AI initiatives, which also saw its stock price soar and market capitalization exceed $2 trillion, joining the ranks of tech giants such as Apple, Microsoft, and Nvidia.
The positive earnings in the first quarter were attributed to a series of AI product launches part of its Gemini initiative. During the Google I/O developer conference, the company introduced an advanced universal AI assistant designed to interact through smart glasses, boasting that its new Gemini AI is 20% quicker than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some reservations about AI Overviews, suggesting it may take time to positively impact Search monetization, he also noted that AI is already benefiting Google Cloud, predicting a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared an optimistic view, categorizing Google as one of the investment firm’s preferred technology stocks alongside Uber and Amazon, and highlighting their excitement about the progress in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that although the current outlook for Google’s AI is promising, it is uncertain whether AI will sustain a long-term boost in sales.