Google’s upcoming second-quarter earnings report is expected to shine, as analysts from Wedbush, J.P. Morgan, and Bank of America foresee positive impacts from the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, will release its earnings after the market closes on Tuesday.
Following Nvidia’s recent earnings report, which indicated strong performance, major tech companies are ramping up their investments in AI. Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google. They believe that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will enhance sales.
In a recent research note, the analysts expressed optimism about the growth of AI technology within Google’s operations, stating that a more extensive rollout of AI overviews is likely to increase activity in the core Search business. This optimism comes despite some initial setbacks during the rollout of AI overviews, which faced criticism online for generating errors and misleading information. 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 bolstered by its AI capabilities, which resulted in the company’s stock surging and its market capitalization exceeding $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
Over the past few months, Google has released a series of new AI products as part of its Gemini offerings. At its recent Google I/O developer conference, the company unveiled an advanced universal AI assistant that can interact through a user’s smart glasses. Google asserts that its latest Gemini AI outperforms the latest version of ChatGPT by 20% in speed.
While Wedbush’s Dan Ives expressed caution regarding the impact of AI Overviews, he acknowledged their potential to contribute positively to Search monetization in the future. He noted that AI technology is already enhancing the performance of Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic view, identifying Google as one of the investment firm’s top technology stocks, alongside Uber and Amazon, and emphasizing enthusiasm for the advancements in Generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that although the current AI developments for Google are promising, it remains uncertain whether these innovations will lead to sustained sales growth in the long run.