Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s latest advancements in artificial intelligence will positively influence its second-quarter earnings, with Alphabet poised to release its earnings report after hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have improved their revenue forecasts for Google, attributing this optimism to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, they expressed confidence in the potential of AI integrations across Google’s platforms, stating that a wider rollout of AI overviews would likely increase user engagement in the core Search business. This optimism persists despite some early challenges with AI overviews, which faced criticism for inaccuracies. Following their upgraded outlook, they raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, credited in part to advancements in AI. This boost led to a surge in its stock price, increasing the company’s market capitalization to over $2 trillion, placing it alongside tech giants such as Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of AI product launches under its Gemini AI initiative. Notable announcements at the recent Google I/O developer conference included a futuristic universal AI assistant capable of interacting through smart glasses. Google has claimed that the latest iteration of its Gemini AI outperforms the most recent version of ChatGPT by 20%.
While Wedbush’s Dan Ives maintained a cautious stance regarding AI Overviews, suggesting it might take time to benefit Search monetization, he acknowledged that AI is already making a significant impact on Google Cloud. He anticipates, with support from other Wall Street analysts, that Google will report a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also shared a positive outlook, listing Google among their leading tech stock recommendations, alongside Uber and Amazon, and expressed optimism about the advancements in Generative AI ahead of Alphabet’s second-quarter earnings announcement.
Raymond James analyst Josh Beck provided a note of caution, stating that while the current financial outlook for Google’s AI is optimistic, it’s yet to be confirmed whether these advancements will sustain long-term sales growth.