Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will give a boost to its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, pointing to the company’s integration of its Gemini AI into Google Cloud and AI Overviews in Google Search as key drivers of sales growth. They noted in a recent research note that they remain optimistic about the expanding role of AI across Google’s ecosystem, believing it will enhance user engagement in the core Search business, despite some earlier challenges with the initial launch of AI Overviews, which faced criticism for inaccuracies. Consequently, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly influenced by AI advancements. This surge in earnings caused the company’s stock to rise, allowing it to surpass a $2 trillion market capitalization, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed several new AI product releases related to its Gemini offerings. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed cautious optimism regarding AI Overviews, suggesting that it could support Search monetization over time, he acknowledges the current benefits of AI for Google Cloud. Ives noted that, consistent with other Wall Street analysts, he expects a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth echoed positive sentiments about Google, recently ranking it as one of their top tech stock picks, alongside Uber and Amazon. He expressed enthusiasm for the progress in Generative AI ahead of Alphabet’s quarterly earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative surrounding AI and its potential impact on Google, the long-term effects on sales remain uncertain.