Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings when the tech giant reports its results after the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Alphabet, Google’s parent company. They attribute this upward revision to the integration of Gemini into Google Cloud and the rollout of AI Overviews in Google Search, stating that these innovations could enhance sales. Despite some initial hiccups with AI Overviews, which faced scrutiny for errors, they remain optimistic. The analysts have raised 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, largely due to contributions from artificial intelligence. This impressive performance led to a surge in stock price, pushing its market capitalization past the $2 trillion mark, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
Google’s successful first quarter was supported by the recent launch of various AI products under its Gemini AI brand. Notably, during its annual developer conference, Google I/O, the company unveiled ambitious plans for a universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed less enthusiasm for the performance of AI Overviews, he noted that it could eventually support monetization in the Search segment. He emphasized that AI is already providing a boost to Google Cloud, expecting a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also shared positive insights, listing Google as one of the top technology investment choices along with Uber and Amazon, indicating that his team appreciates the progress made with Generative AI as Alphabet prepares for the upcoming earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current outlook for Google’s AI efforts appears favorable, the ability of AI to deliver sustained sales growth for the company in the long term remains uncertain.