Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence will boost its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to announce its earnings on Tuesday evening.
The analysts at Bank of America, Justin Post and Nitin Bansal, have updated their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search as key factors for increased sales. They expressed optimism in a recent research note, stating that the widespread rollout of AI overviews could enhance activity in Google’s core Search division. This positive sentiment persists despite some earlier challenges with the rollout, during which the AI tool faced criticism for errors. Consequently, they have upgraded their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in its first quarter, largely attributed to AI developments. This surge in profitability contributed to a significant rise in its stock price, elevating the company’s market value beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The company’s impressive performance in the first quarter followed numerous new AI product launches under its Gemini initiative. At the recent Google I/O developer conference, Google introduced a futuristic universal AI assistant equipped to interact through smart glasses. Google claims its latest Gemini AI functions 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the potential of AI Overviews, he acknowledged that it could support Search monetization over time. He emphasized that AI is already serving as a growth driver for Google Cloud and anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, naming Google as one of the top tech stock picks, alongside Uber and Amazon, affirming confidence in the progress of Generative AI ahead of Alphabet’s second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that it remains to be seen whether AI will substantively impact Google’s long-term sales growth.