Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will positively influence its upcoming second-quarter earnings. The parent company, Alphabet, is scheduled to disclose its earnings on Tuesday after market closure.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing the expected growth to the integration of Gemini into Google Cloud and AI Overviews on Google Search. They expressed confidence that the expanded use of AI throughout Google’s platforms would enhance activity in its core Search business, despite some challenges encountered during the initial launch of AI Overviews, which faced online criticism for errors and inaccuracies. Their forecast for Google’s stock price has been raised from $200 to $206.
In its first-quarter earnings report in April, Google saw a remarkable profit increase of 60%, largely driven by AI innovations, which resulted in a surge in its stock price and raised its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of AI product launches as part of its Gemini AI initiative. At the recent Google I/O developer conference, the company showcased a futuristic universal AI assistant capable of visual and verbal interactions through smart glasses. Google claims its new Gemini AI outperforms the latest ChatGPT by being 20% faster.
While Wedbush analyst Dan Ives voiced caution regarding the immediate impact of AI Overviews, he noted their potential to enhance monetization in Search over time. He also highlighted that AI’s impact on Google Cloud is already evident, with expectations for a 27% revenue growth in this division compared to last year.
J.P. Morgan analyst Doug Anmuth shared an optimistic view, identifying Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressed excitement about the advancements in generative AI prior to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google looks promising, the long-term implications for sales growth remain uncertain.