Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate a positive impact on Alphabet’s second-quarter earnings due to Google’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after market close.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue predictions for Google, highlighting the boost expected from the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism about the growing incorporation of AI across Google’s services, which they believe will enhance user engagement in the core Search business. Despite some initial challenges with the AI Overview tool, which faced criticism for inaccuracies, the analysts have adjusted their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable 60% increase in profits, largely attributed to its AI initiatives. Following this performance, the company’s stock surged, pushing its market capitalization beyond $2 trillion, alongside industry giants like Apple, Microsoft, and Nvidia.
Google’s first-quarter success was fueled by recent launches of new AI products, particularly its Gemini offerings. At the Google I/O developer conference, the company introduced ambitious features, including a universal AI assistant capable of real-time interaction through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush expressed cautious optimism about AI Overviews, he noted that it could eventually support Search monetization. He also mentioned that AI is already enhancing Google Cloud, forecasting a 27% revenue increase in that sector compared to the previous year.
Doug Anmuth from J.P. Morgan also shared a positive outlook, identifying Google as one of the firm’s top tech investment picks, alongside Uber and Amazon, citing strong progress in generative AI ahead of Alphabet’s earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding AI is favorable for Google, the long-term effects on sales remain uncertain.