Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance the company’s performance in the upcoming second-quarter earnings report. Google’s parent company, Alphabet, is scheduled to release its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google, attributing the expected growth to the integration of Gemini into Google Cloud and the introduction of AI Overviews within Google Search. They expressed optimism in a recent research note, stating that improved AI integrations across Google’s ecosystem should drive increased activity in its core Search business. While they noted that the initial rollout of AI Overviews faced some challenges, they have updated their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a 60% profit surge in the first quarter, largely credited to its AI efforts. This strong performance resulted in a surge in the company’s stock price, elevating its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results came on the heels of multiple AI product launches, including advancements presented at the Google I/O developer conference. Among these was a universal AI assistant capable of interacting with users through smart glasses, with Google claiming that its updated Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he suggested that it could still positively impact Search monetization in the long run. Moreover, he highlighted that AI is already having a favorable effect on Google Cloud, with expectations of a 27% revenue increase from the previous year.
Doug Anmuth from J.P. Morgan also shared an optimistic viewpoint, naming Google among the top tech investment choices alongside Uber and Amazon, and expressing enthusiasm about progress in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is positive, the long-term impact of AI on Google’s sales remains uncertain.