Analysts from Wedbush, J.P. Morgan, and Bank of America expect Google’s advancements in artificial intelligence to positively impact its second-quarter earnings, with Alphabet scheduled to release its financial results after market close on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google. Justin Post and Nitin Bansal of Bank of America attribute the anticipated sales boost to the integration of the Gemini AI platform into Google Cloud and the introduction of AI Overviews in Google Search.
In a research note released late last week, they expressed optimism about the increasing AI implementations across Google’s services, noting that broader adoption of AI Overviews could enhance user engagement in the core Search segment, despite initial challenges where the tool faced criticism for inaccuracies. Following this sentiment, they adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits during the first quarter, significantly aided by AI developments. This performance led to a surge in its stock price, raising the company’s market capitalization above $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches as part of its Gemini offerings, showcased in its recent developer conference, Google I/O. Notably, it introduced an advanced universal AI assistant capable of interacting through smart glasses, claiming the latest version of Gemini AI is 20% faster than the latest iteration of ChatGPT.
Dan Ives of Wedbush took a more cautious stance on the AI Overviews compared to Post and Bansal, acknowledging their potential to eventually assist in monetizing Search. He also highlighted that AI is already contributing to growth in Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared similar positive views, naming Google as one of the firm’s top technology stock picks alongside Uber and Amazon, citing optimism regarding progress in generative AI ahead of Alphabet’s upcoming earnings announcement.
Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI developments is favorable, it remains uncertain whether AI will consistently drive sales growth in the long run.