According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its performance in the upcoming second-quarter earnings report, set to be released after market close on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, attributing this to the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search. They expressed optimism about the potential for AI integrations to drive higher engagement within Google’s core Search business, despite some initial challenges that led to humorous internet reactions regarding the tool’s performance. As a result, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, which was partially driven by its AI initiatives. This surge contributed to a significant rise in the company’s stock price and pushed its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed the rollout of various new AI products as part of its Gemini offerings, including a futuristic AI assistant showcased at the Google I/O developer conference capable of interfacing through a user’s smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed caution regarding the immediate impact of AI Overviews, he noted that they could become beneficial for search monetization over time. He also indicated that AI is already contributing to growth in Google Cloud, anticipating a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a similar positive outlook, listing Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, while highlighting satisfaction with the progress of generative AI ahead of Alphabet’s second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that despite the current optimism surrounding AI’s impact on Google’s business, the long-term effects on sales remain uncertain.