Analysts from Wedbush, J.P. Morgan, and Bank of America predict a positive impact on Google’s second-quarter earnings due to its advancements in artificial intelligence. Google’s parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
Both Bank of America analysts Justin Post and Nitin Bansal have lowered their revenue forecasts for Google. They believe that the integration of AI tools such as Gemini into Google Cloud and AI Overviews in Google Search will enhance sales. In a research note released last week, they expressed optimism about the growing AI applications across Google’s ecosystem, suggesting that a wider implementation of AI overviews could increase user engagement in the core Search business. This optimism remains intact despite some early issues with the AI overview tool, which faced criticism for producing errors. Consequently, the analysts have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% increase in profits for the first quarter, largely attributed to its AI advancements, prompting a surge in its stock price and boosting its market value beyond $2 trillion, placing it alongside 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 AI suite. Notable announcements at the Google I/O developer conference included plans for a universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed cautious optimism regarding AI Overviews, he noted in a recent research note that these features could potentially enhance Search monetization in the future. He also highlighted that AI is already contributing positively to Google Cloud, with expectations of a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic outlook, identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and commending the progress in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative around Google’s AI, the long-term impact on sales remains uncertain.