Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market closure.
The analysts have adjusted their revenue forecasts for Google, citing the integration of its Gemini AI into Google Cloud and the application of AI Overviews in Google Search as key drivers of sales growth. Bank of America’s Justin Post and Nitin Bansal expressed optimism about the expanding AI features within Google’s ecosystem, noting that a wider implementation of AI Overviews is expected to increase user engagement in the core Search business. They acknowledged some initial missteps during the rollout of AI Overviews, where the tool faced criticism for inaccuracies. As a result, they have revised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly attributed to AI advancements. This surge led to a spike in its stock price, pushing its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches, particularly its Gemini AI offerings. At its recent developer conference, Google I/O, it unveiled a future-facing universal AI assistant designed to interact through smart glasses. The company claims its updated Gemini AI outperforms the latest version of ChatGPT by 20% in speed.
While Wedbush analyst Dan Ives was slightly less enthusiastic about AI Overviews than his counterparts, he suggested that these features could eventually support Search monetization. He also noted that AI is already positively impacting Google Cloud, anticipating a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic view, highlighting Google as one of their top tech stock picks, alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI in relation to Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck raised a cautionary note, stating that while the current narrative surrounding AI’s impact on Google is favorable, its long-term effects on sales remain uncertain.