Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its financial performance in the upcoming second-quarter earnings report, expected after the market closes on Tuesday.
Both Bank of America and Wedbush have elevated their revenue forecasts for Alphabet, Google’s parent company. Analysts Justin Post and Nitin Bansal from Bank of America highlighted that the incorporation of Gemini into Google Cloud and the AI Overviews feature in Google Search will likely contribute to increased sales. They stated in a recent research note that they remain optimistic about the growing integration of AI throughout Google’s ecosystem, which they believe will encourage more user engagement with the core Search business, despite some initial challenges faced by the AI Overviews tool.
In its first quarter, Google reported a notable 60% rise in profits, partly attributed to its AI initiatives. This impressive performance led to a surge in its stock price, elevating its market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The company’s strong results follow a series of new AI product launches under its Gemini AI brand. At the recent Google I/O developer conference, Google showcased an innovative universal AI assistant capable of interacting through smart glasses, claiming that its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to his peers, he noted that it could provide long-term benefits for Search monetization. He also mentioned that AI is already having a positive impact on Google Cloud services. Subsequent revenues from the Cloud division are expected to reflect a 27% increase compared to the previous year.
Echoing this optimistic outlook, J.P. Morgan analyst Doug Anmuth included Google among its top tech stock picks alongside Uber and Amazon. He expressed enthusiasm for the progress made in generative AI as Alphabet prepares to unveil its quarterly earnings.
However, analysts like Josh Beck from Raymond James caution that while the current AI developments for Google appear promising, the long-term impact on sales remains uncertain.