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, with Alphabet scheduled to report its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, attributing the likely sales boost to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism about the ongoing AI integrations across Google’s ecosystem, asserting that a broader rollout of AI overviews will likely enhance activity in Google’s core Search business. Despite some initial issues with the AI overview tool, which faced criticism for producing errors, they raised their stock price target for Google from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, with AI being a significant contributor. This strong performance resulted in the company’s stock price soaring, helping its market capitalization exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s positive first-quarter performance was supported by the launch of its new artificial intelligence products, part of its Gemini AI lineup, during the Google I/O developer conference. This included a futuristic universal AI assistant capable of interacting through smart glasses, with Google claiming that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he mentioned that they could potentially support search monetization in the long run. Ives noted that AI is already contributing to growth in Google Cloud, and like many analysts on Wall Street, anticipates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth echoed this optimism, listing Google as one of the firm’s top technology stocks alongside Uber and Amazon, and highlighting the positive developments in Generative AI ahead of Alphabet’s upcoming earnings report. Meanwhile, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding Google’s AI initiatives is favorable, it remains uncertain whether AI will continue to drive long-term sales growth.