Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will significantly enhance its earnings for the second quarter. The parent company, Alphabet, is scheduled to release its earnings report on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, attributing potential sales boosts to the integration of Gemini into Google Cloud and enhancements in AI Overviews within Google Search. They expressed optimism about the broader deployment of AI features, which they believe will increase activity in the core Search business, despite earlier challenges when AI Overviews faced criticism for inaccuracies. They have revised their stock price target for Google from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, largely due to AI advancements, which propelled its stock price and pushed its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of new AI product launches, including exciting features unveiled during the Google I/O developer conference, such as a universal AI assistant capable of interacting through users’ smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Wedbush’s Dan Ives was more cautious regarding the impact of AI Overviews but noted that they could benefit Search monetization in the long run. He also mentioned that AI is already enhancing Google Cloud performance, predicting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, highlighting Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and expressed optimism about the company’s generative AI advancements leading up to the earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears positive, the long-term impact of AI on sales remains uncertain.