Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will significantly enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google, with analysts Justin Post and Nitin Bansal noting that the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search could lead to increased sales. They expressed optimism about the growing AI capabilities across Google’s platforms, suggesting that a broader deployment of AI overviews could promote more engagement in the core Search business. They also revised their price target for Google’s stock upward from $200 to $206, despite initial setbacks with AI overviews that attracted some online criticism.
In April, Google reported an impressive 60% profit increase in the first quarter, driven by its AI developments, which notably elevated its stock price and increased its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive performance in the first quarter followed a series of new AI product launches associated with the Gemini AI initiative. Recent announcements during Google I/O included a universal AI assistant capable of interacting through smart glasses. The company claims its Gemini AI is 20% faster than ChatGPT.
While Wedbush’s Dan Ives was somewhat cautious about the AI Overviews feature’s immediate impact, he noted that it could positively affect Search monetization over time. He also pointed out that AI is already benefiting Google Cloud, anticipating a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared an optimistic view, designating Google as one of the top tech stocks, alongside Uber and Amazon, in light of promising advancements in General AI. However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI for Google looks favorable, it’s uncertain whether it will lead to long-term sales growth.