Analysts from Wedbush, J.P. Morgan, and Bank of America expect Google’s upcoming second-quarter earnings to be impressive, thanks in part to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
Both Bank of America and Wedbush analysts have revised their revenue predictions for Google. Specifically, Bank of America’s Justin Post and Nitin Bansal attribute the anticipated sales growth to the integration of the Gemini AI system into Google Cloud and the implementation of AI Overviews in Google Search. They expressed optimism in a recent research note, stating that wider adoption of AI features will likely enhance engagement within Google’s core Search business, despite initial challenges during the rollout phase that resulted in some online mockery due to inaccuracies in the AI responses. Post and Bansal increased 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 significant role in this growth. This resulted in a jump in stock prices, elevating the company’s market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive performance in the first quarter followed months of launching new artificial intelligence features under the Gemini brand. Noteworthy unveilings at the Google I/O developer conference included plans for a universal AI assistant capable of interacting via smart glasses. Google also boasts that its latest Gemini AI operates at speeds 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the impact of AI Overviews, he noted their potential to enhance Search monetization in the long term. He also indicated that AI is already making significant contributions to Google Cloud, predicting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a positive outlook and listed Google as one of the firm’s top tech investment picks, alongside Uber and Amazon. He noted his team’s enthusiasm for the advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI initiatives is encouraging, the long-term effects on sales growth remain uncertain.