Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with the company set to release its financial results on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing potential sales growth to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed confidence that these AI enhancements would drive increased activity within Google’s core Search business, despite some initial challenges and public scrutiny of the AI Overviews feature. Their price target for Google’s stock has been adjusted from $200 to $206.
Google reported a significant 60% rise in profits in the first quarter, largely credited to AI innovations. This remarkable performance led to a surge in its stock price, boosting its market capitalization beyond $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
The positive feedback from the first quarter followed an influx of new AI products introduced as part of the Gemini AI initiative. Among these was a next-generation AI assistant unveiled at the Google I/O developer conference, capable of interacting with users through smart glasses. Google claims its latest iteration of Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook regarding AI Overviews, noting that it might enhance Search monetization in the long run, he acknowledged that AI technologies are currently benefiting Google Cloud, predicting a 27% surge in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth echoed these positive sentiments, labeling Google as one of their top tech stock picks alongside Uber and Amazon, and expressed optimism regarding the progress in generative AI ahead of Alphabet’s second-quarter earnings release.
However, analyst Josh Beck from Raymond James cautioned that while the current enthusiasm surrounding Google’s AI efforts is optimistic, the long-term impact of AI on Google’s sales remains uncertain.