Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s recent advancements in artificial intelligence will contribute positively to its earnings for the second quarter. Google’s parent company, Alphabet, is expected to report its earnings after the market closes on Tuesday.
Bank of America analysts, including Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google. They believe that the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search will significantly enhance sales.
In a research note, they stated, “We remain optimistic about the increasing AI integrations across Google’s ecosystem, and we think that a wider rollout of AI overviews will lead to greater engagement in the core Search business.” This optimism remains despite initial struggles with the rollout of the AI Overview tool, which faced criticism for some inaccuracies. Consequently, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, with AI playing a crucial role in this growth. This surge in profits led to a substantial increase in its stock price, propelling the company’s market capitalization beyond $2 trillion alongside tech giants like Apple, Microsoft, and Nvidia.
Following the launch of its Gemini AI offerings, Google has introduced several new AI products, including a universal AI assistant capable of interacting through smart glasses, showcased at the Google I/O developer conference. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush displayed a more cautious stance on AI Overviews than his Bank of America counterparts, suggesting that while the feature might eventually support Search monetization, its immediate impact is less certain. However, he noted that AI is already having a positive effect on Google Cloud, and he anticipates a 27% growth in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar positive outlook, naming Google as one of the firm’s top tech investments, alongside Uber and Amazon, and expressing encouragement regarding the advancements in general AI ahead of Alphabet’s quarterly earnings announcement.
Meanwhile, Josh Beck of Raymond James issued a word of caution, acknowledging the current positive narrative surrounding Google’s AI but emphasizing that the long-term effects of AI on Google’s sales remain uncertain.