Analysts from Wedbush, J.P.Morgan, and Bank of America predict that Google’s advancements in artificial intelligence could enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will contribute to increased sales.
In a recent research report, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This positive outlook comes despite some challenges encountered during the initial rollout of AI overviews, which faced criticism and became the subject of online jokes for generating errors. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, partly attributed to its AI initiatives. This positive performance led to a surge in the company’s stock price, elevating its market capitalization to over $2 trillion, joining industry giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter came on the heels of multiple new AI product launches related to its Gemini AI initiatives. At its recent developer conference, Google I/O, the company unveiled an advanced AI assistant capable of interpreting and responding through smart glasses. Google claims that its latest version of Gemini AI is 20% faster than the latest ChatGPT.
Although Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, he noted in a Monday report that it “may become a tailwind for Search monetization over time.” Ives pointed out that AI is already benefiting Google Cloud, and, like other analysts, he anticipates a 27% increase in Cloud revenue year-over-year.
J.P.Morgan’s Doug Anmuth shared a similar positive viewpoint, labeling Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He expressed optimism regarding the progress of Generative AI in anticipation of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI developments is encouraging, the long-term impact on the company’s sales growth remains uncertain.