Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for the tech giant, attributing this adjustment to the company’s AI-focused initiatives, including the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism about the potential of these AI features to enhance sales, despite initial challenges with AI overviews that led to some humorous moments online due to errors and inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
In its first-quarter report from April, Google highlighted a substantial 60% rise in profits largely driven by AI advancements, causing its stock price to surge and its market capitalization to exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google attributed its success in the first quarter to a series of new AI product releases as part of its Gemini AI framework. Recent introductions at the Google I/O developer conference included an innovative AI assistant designed to interact through smart glasses, with Google asserting that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution towards the immediate impact of AI Overviews on revenue, he indicated that they could support Search monetization in the long run. He also noted that AI is already contributing positively to Google Cloud, projecting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth supported this optimistic view, highlighting Google as one of their top tech stock picks alongside Uber and Amazon, stating that his team is encouraged by the progress in generative AI ahead of Alphabet’s earnings report. Conversely, Raymond James analyst Josh Beck cautioned that despite the current optimistic narrative surrounding AI, the long-term effects on Google’s sales remain uncertain.