According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s recent advancements in artificial intelligence are expected to positively impact its second-quarter earnings. The parent company, Alphabet, will release its earnings report following Tuesday’s market close.
Analysts at Bank of America and Wedbush have increased their revenue forecasts for Google. Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini technology into Google Cloud and the addition of AI Overviews in Google Search will enhance sales.
In a recent research note, they expressed optimism about the growing integration of AI across Google’s platforms, suggesting that the wider rollout of AI Overviews could lead to increased user activity in the core Search segment. This optimism persists despite initial challenges with the AI Overviews, which faced criticism for producing errors and inaccuracies. They revised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% increase in profits for the first quarter, driven in part by AI contributions. This impressive performance led to a significant rise in stock price, elevating the company’s market capitalization beyond $2 trillion, joining other tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches stemming from its Gemini AI innovations. Highlights from the recent Google I/O developer conference included a vision for an AI assistant capable of interacting through smart glasses. Google asserts that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was somewhat cautious about the long-term impact of AI Overviews, he noted that it could eventually benefit search monetization. He also emphasized the current advantages AI is providing to Google Cloud, anticipating a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan echoed the positive outlook, identifying Google alongside Uber and Amazon as one of the firm’s top tech stock picks. He highlighted the “encouraging” progress in generative AI development as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck issued a note of caution, indicating that despite the favorable current narrative around AI, the long-term implications for Google’s sales remains uncertain.