Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings. The parent company Alphabet is scheduled to announce its earnings on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing the expected boost to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search. They expressed optimism about the growing presence of AI across Google’s platforms and believe that wider deployment of AI Overviews could enhance engagement in the core Search business, despite earlier glitches during its initial rollout. They raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, driven in part by its AI initiatives. This impressive performance resulted in a surge in the company’s stock price, elevating its market capitalization to over $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
Following months of launching new AI products under its Gemini AI suite, Google also showcased a universal AI assistant at its recent developer conference, Google I/O, which is designed to interact through smart glasses. Google claims its latest Gemini AI operates 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives tempered his enthusiasm regarding AI Overviews, he noted that they could become a beneficial factor for Search monetization in the future. He also stated that AI is already contributing positively to Google Cloud, anticipating a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, selecting Google as one of the top tech stocks in an investment report last week, along with Uber and Amazon, and expressed encouragement regarding the progress in generative AI before Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI is favorable for Google, its long-term impact on driving sales remains uncertain.