Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is expected to release its earnings report on Tuesday after the market closes.
Following recent developments, Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google upward. They attribute this boost to the integration of the Gemini AI platform into Google Cloud and the implementation of AI Overviews in Google Search. Their research indicates that these AI advancements could enhance sales significantly.
In their research note, the analysts expressed continued optimism about the growing presence of AI in Google’s operations, believing that a wider introduction of AI overviews will stimulate increased usage of the core Search service. This optimism persists despite some challenges during the initial rollout of AI overviews, where the tool faced criticism for generating inaccuracies. As a result of these positive expectations, they have raised their stock price target for Google from $200 to $206.
Previously, Google reported an impressive 60% profit increase in the first quarter, largely fueled by AI innovations. This growth drove the stock price up, elevating the company’s market capitalization above $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed the launch of new AI initiatives under the Gemini brand, including unveiling a futuristic AI assistant capable of interacting through smart glasses during the Google I/O developer conference. Google claims that its latest Gemini AI technology is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives has a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that these features could eventually benefit search monetization. He also highlighted that AI is already positively influencing Google Cloud’s performance, projecting a 27% increase in its revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth also shared an optimistic view, placing Google among his firm’s top technology stock picks—alongside Uber and Amazon—while noting that his team is pleased with the progress in generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current positive narrative surrounding AI at Google is promising, the long-term impact on sales remains uncertain.