Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will positively impact the company’s earnings report for the second quarter, which is expected after the market closes on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, highlighting the integration of the Gemini AI platform into Google Cloud and its AI Overviews feature in Google Search as key drivers for sales growth. They expressed confidence in the potential of AI integrations to enhance activities in Google’s core Search business, despite initial challenges with AI Overviews that attracted online ridicule for errors and inaccuracies. They have also raised their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, primarily fueled by its AI initiatives. This surge led to a spike in the company’s stock price, propelling its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The positive performance in the first quarter came on the heels of various new AI product launches as part of the Gemini AI suite. Among these innovations presented at the Google I/O developer conference was a futuristic AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed more cautious views on the immediate impact of AI Overviews compared to Post and Bansal, he noted in a research update that this feature could eventually enhance monetization for Google Search. Additionally, he believes AI is already providing a boost to Google Cloud services, forecasting a 27% increase in Cloud revenue compared to last year, in line with other analysts’ expectations.
J.P. Morgan analyst Doug Anmuth also reflected the optimistic outlook, naming Google as one of the firm’s top tech stocks alongside Uber and Amazon. He mentioned that his team is encouraged by the progress in generative AI as Alphabet prepares to release its second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI efforts is positive, it remains uncertain whether these advancements will lead to sustained long-term sales growth.