Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for the tech giant. They believe the integration of Google’s Gemini AI into Google Cloud and AI Overviews in Google Search will drive sales growth. In a recent research note, they expressed optimism about the ongoing AI developments within Google’s ecosystem, highlighting that a wider application of AI overviews could elevate engagement within the core Search business. Despite initial challenges during the rollout of AI overviews—where the feature faced criticism for inaccuracies—they have raised their price target for Google’s stock from $200 to $206.
In its first-quarter report in April, Google experienced a notable profit surge of 60%, which was partially attributed to its AI initiatives. This performance led to a rise in its stock price, enabling the company’s market valuation to surpass $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results come on the heels of a series of new AI product launches under the Gemini AI brand. At the Google I/O developer conference, the company unveiled a future AI assistant capable of interacting through smart glasses. Google asserts that this latest iteration of Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the potential of AI Overviews compared to Post and Bansal, he noted that it could eventually benefit Search monetization. Ives also reported that AI is already enhancing the performance of Google Cloud, with a projected 27% increase in Cloud revenues year-over-year.
J.P. Morgan analyst Doug Anmuth shared this positive outlook last week, placing Google alongside Uber and Amazon as one of the firm’s top tech stock picks, citing his team’s optimism regarding advancements in Generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current sentiment surrounding Google’s AI is optimistic, the long-term impact on sales remains uncertain.