Analysts from Wedbush, J.P. Morgan, and Bank of America project that Google’s AI advancements will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Analysts from Bank of America, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, citing the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search as key factors for potential sales growth. They expressed optimism in a recent research note, noting that the broader implementation of AI Overviews could enhance user engagement in Google’s core Search business. This comes despite some early challenges with AI Overviews, which faced criticism on the internet for inaccuracies. As a result, 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, largely attributed to its AI initiatives. Consequently, the company’s stock price surged, elevating its market capitalization to over $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
Following the launch of several new AI products, part of its Gemini offerings, Google showcased its latest innovations during the Google I/O developer conference, including a futuristic universal AI assistant capable of interacting through smart glasses. According to Google, the latest version of Gemini AI is 20% faster than current ChatGPT models.
Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, suggesting that while they may enhance Search monetization eventually, the immediate impact remains uncertain. However, he confirmed that AI is already contributing positively to Google Cloud, with a projected 27% increase in Cloud revenue year-over-year, in line with broader market sentiments.
J.P. Morgan analyst Doug Anmuth shared a hopeful outlook, identifying Google as a top tech stock alongside Uber and Amazon, and highlighting optimism regarding its advancements in generative AI prior to the earnings report.
Meanwhile, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI at Google is promising, its long-term effect on sales remains to be seen.