Google’s advancements in artificial intelligence are expected to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to announce its earnings after the market closes on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have raised their revenue forecasts for Google, noting that the company’s integration of its Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search are likely to enhance sales. In a recent research note, they expressed optimism about the growing AI integrations and their potential to boost activity in Google’s core Search business, despite some initial challenges with the rollout of AI Overviews. They adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, which was partially attributed to its AI initiatives. This performance led to a surge in the company’s stock, helping it achieve a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches under its Gemini AI brand. At its recent developer conference, Google I/O, the company unveiled a universal AI assistant capable of interacting through users’ smart glasses, claiming that its latest Gemini AI runs 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was somewhat less enthusiastic about AI Overviews than his counterparts, he noted in a Monday research note that this feature could eventually assist in monetizing Google Search. He also pointed out that AI is already providing a boost to Google Cloud, anticipating a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth sounded a similar positive note, designating Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI as Alphabet prepares for its second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI at Google is favorable, the long-term impact of AI on the company’s sales remains uncertain.