Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to positively impact its second-quarter earnings, as Alphabet prepares to announce its earnings later today.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue projections for Google, citing the integration of the Gemini AI system into Google Cloud and AI Overviews in Google Search as key drivers for potential sales growth. They expressed optimism about the ongoing integration of AI technologies throughout Google’s ecosystem, believing that AI overviews could enhance engagement within the core Search business, despite some initial issues during its rollout that led to online mockery due to inaccuracies. They’ve also raised their stock price forecast for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, attributing part of its success to AI innovations. This strong performance resulted in a surge in its stock price, helping the company’s market capitalization exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive results followed a series of announcements related to new AI products, particularly under the Gemini AI banner, showcased at the Google I/O developer conference. Among these was a futuristic universal AI assistant capable of interacting through smart glasses, with Google claiming its new Gemini AI model is 20% faster than the latest ChatGPT.
While Dan Ives of Wedbush was more cautious regarding the potential of AI Overviews, he noted that it could provide a favorable impact on Search monetization in the long run. He also highlighted that AI is already contributing positively to Google Cloud, anticipating a 27% year-over-year increase in its revenue.
Doug Anmuth from J.P. Morgan shared a similar optimistic view, labeling Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and expressed encouragement regarding the company’s advancements in generative AI in anticipation of the upcoming earnings report.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding AI’s impact on Google is encouraging, the long-term effects on sales remain uncertain.