Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s recent advancements in artificial intelligence will positively impact its second-quarter earnings, with the parent company, Alphabet, set 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, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They noted in a recent research note that the wider implementation of AI overviews is likely to enhance activity within the core Search business, despite some early challenges during the rollout where the tool faced criticism for inaccuracies. As a result, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% increase in profits for the first quarter, which was largely attributed to its AI initiatives. This surge caused a boost in the company’s stock price, elevating its market capitalization beyond the $2 trillion mark, alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed a series of new AI product launches as part of Google’s Gemini AI strategy. Notably, at the Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI technology is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to other analysts, he acknowledged that they could eventually benefit Search monetization. Ives also pointed out that AI advancements are already having a positive effect on Google Cloud, predicting a 27% revenue increase compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic view, listing Google as one of the firm’s top technology stocks along with Uber and Amazon, and expressing confidence in the company’s progress with generative AI as it approaches its second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that the current positive narrative surrounding Google’s AI efforts does not guarantee sustained long-term sales growth from these advancements.