Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, the parent company of Google, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, anticipating that the integration of Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search will stimulate sales growth. They expressed optimism about the potential for AI across Google’s operations to elevate activity in the core Search business, despite some initial issues with the AI Overviews launch that led to humorous internet reactions due to inaccuracies. As a result, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable profit increase of 60% in the first quarter, largely attributed to its AI initiatives, which also caused its stock price to skyrocket, elevating its market capitalization to over $2 trillion, positioning it alongside Apple, Microsoft, and Nvidia.
Following its fruitful first-quarter performance, Google has been actively releasing new AI products under its Gemini AI brand. At the recent Google I/O developer conference, the company unveiled futuristic AI advancements, including a universal assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI model operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the potential of AI Overviews, he acknowledged that it may contribute positively to Search monetization in the long term. He also noted that AI is already enhancing Google Cloud’s performance, with analysts generally predicting a 27% revenue increase for the Cloud division compared to the previous year.
J.P. Morgan’s Doug Anmuth confirmed the optimistic outlook, listing Google as one of the top technology stocks alongside Uber and Amazon, and expressing encouragement over the progress in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that the positive current narrative surrounding AI may not guarantee sustained sales growth for Google in the future.