Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s recent advancements in artificial intelligence will positively influence its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google, citing the integration of Gemini AI into Google Cloud and enhanced AI Overviews in Google Search as significant contributors to potential sales growth. They expressed confidence in the ongoing integration of AI within Google’s services, suggesting that a wider deployment of AI overviews could increase engagement in its main Search segment. They have updated their price target for Google’s stock from $200 to $206, despite earlier challenges encountered during the introduction of AI overviews, which faced criticism for producing errors and inaccuracies.
In its first-quarter earnings report released in April, Google reported a remarkable 60% increase in profits, attributing a portion of this success to AI advancements. This financial boost resulted in a surge of its stock price, elevating its market capitalization beyond the $2 trillion mark, a feat shared with tech giants like Apple, Microsoft, and Nvidia.
Google’s notable performance in the first quarter coincided with a series of launches of new AI products under the Gemini initiative. During the recent Google I/O developer conference, the company unveiled a visionary AI assistant capable of interacting through a user’s smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on the impact of AI Overviews compared to Post and Bansal, he suggested it could eventually serve as a windfall for Search monetization. Furthermore, Ives highlighted that AI is already having a favorable effect on Google Cloud, and like other analysts, he predicts a 27% rise in Cloud revenue from the previous year.
J.P. Morgan’s Doug Anmuth supported this optimistic outlook, designating Google as one of the firm’s top technology picks alongside Uber and Amazon, expressing enthusiasm for the advancements in generative AI in anticipation of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is encouraging, the long-term impact of AI on the company’s sales remains uncertain.