Analysts from Wedbush, J.P. Morgan, and Bank of America believe Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is expected to announce its earnings results after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing potential sales growth to the integration of Gemini into Google Cloud and AI Overviews in Search. They noted their optimism regarding the expansion of AI features across Google’s services, which they believe will increase user engagement in its core Search business. Despite initial challenges during the rollout of AI Overviews, which received some negative feedback online, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, aided by its AI initiatives, leading to a surge in its stock price and pushing its market capitalization over $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed extensive launches of new AI products as part of Google’s Gemini AI suite. Highlights from its developer conference, Google I/O, included a futuristic universal AI assistant capable of interacting through smart glasses, with claims that Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he acknowledged potential long-term benefits for Search monetization. He also pointed out that AI is already positively impacting Google Cloud, anticipating a 27% revenue increase for the Cloud division compared to last year.
J.P. Morgan’s Doug Anmuth shared an optimistic outlook, including Google as one of the firm’s top tech stock picks, along with Uber and Amazon, highlighting the encouraging progress of Generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck advised caution, noting that while the current AI developments are favorable, the long-term impact on Google’s sales remains uncertain.