Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence could positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal noted that the incorporation of Gemini technology into Google Cloud and the AI Overviews feature in Google Search is expected to enhance sales. In a recent research note, they expressed optimism regarding the integration of AI across Google’s various platforms, suggesting that the expanded rollout of AI overviews could stimulate greater engagement in the core Search business. They acknowledged earlier issues with the AI Overviews tool, which faced criticism for inaccuracies during its initial release, but still raised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, credited in part to AI advancements. This surge resulted in a significant rise in its stock price, elevating the company’s market valuation to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following numerous AI product launches, including those unveiled at the recent Google I/O developer conference, Google has positioned itself as a leader in the AI landscape. New offerings include a futuristic universal AI assistant capable of interacting through smart glasses, with Google claiming its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives showed some caution regarding AI Overviews, he mentioned that it could serve as a long-term benefit for Search monetization. He also pointed out that AI is already contributing to growth in Google Cloud, echoing sentiments from other analysts who anticipate a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth shared a similar positive outlook, naming Google among the investment firm’s top technology stocks, alongside Uber and Amazon, praising the progress in Generative AI leading up to Alphabet’s earnings announcement.
Raymond James analyst Josh Beck issued a note of caution, emphasizing that although the current sentiment around AI at Google appears favorable, the long-term impact on sales remains uncertain.