Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will positively impact its second-quarter earnings, which will be announced after the market’s close on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing this to the integration of the Gemini AI into Google Cloud and the introduction of AI overviews in Google Search. In a recent research note, they expressed confidence that enhanced AI features within Google’s ecosystem would lead to increased user activity in Search, despite some initial challenges with AI overviews that drew internet criticism for errors and inaccuracies. They upgraded their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely fueled by AI innovations. This financial success led to a significant increase in its stock price, elevating the company’s market capitalization beyond the $2 trillion threshold, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results were supported by various new AI products rolled out under its Gemini AI initiative, with highlights from the Google I/O developer conference showcasing an advanced AI assistant capable of interacting via smart glasses. Google has claimed that its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed cautious optimism regarding the long-term effects of AI overviews on Search monetization, he acknowledged that AI is already contributing positively to Google Cloud. Ives, along with other analysts, anticipates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similar upbeat perspective, designating Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and expressed enthusiasm about the progress of generative AI ahead of Alphabet’s second-quarter earnings report. However, Josh Beck from Raymond James cautioned that while the current sentiment surrounding AI at Google is positive, the long-term impact on sales remains uncertain.