Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings as Alphabet prepares to report its financial results on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have raised their revenue forecasts for Google. They attribute this optimism to the company’s incorporation of Gemini AI into Google Cloud and the new AI Overviews feature in Google Search, which they believe will enhance sales.
In their research note, they expressed confidence in the potential impact of AI integrations across Google’s platform. Despite a rocky start for the AI Overviews feature, which faced criticism due to errors in its output, they increased their price target for Google shares from $200 to $206.
Earlier this year, Google announced a striking 60% profit increase in the first quarter, driven in part by its AI initiatives. This performance led to a surge in the company’s stock, elevating its market capitalization beyond $2 trillion and placing it among the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results coincided with the launch of several AI products, including those unveiled at the Google I/O developer conference. Notably, the company introduced a future universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI can outperform the latest version of ChatGPT by being 20% faster.
While Wedbush analyst Dan Ives holds a more cautious view on the AI Overviews feature than his counterparts, he believes it could support monetization in the Search segment over time. Ives also noted that the AI advancements are already benefiting Google Cloud, predicting that the company will see a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth joined in the positive sentiment, identifying Google as one of the firm’s top tech picks, alongside Uber and Amazon, and expressing enthusiasm about the progress in generative AI ahead of Alphabet’s earnings announcement.
On the other hand, Raymond James analyst Josh Beck cautioned that although the current narrative around AI for Google appears favorable, the long-term effects on sales remain uncertain.