Google is poised for a strong second-quarter earnings report, attributed to its advancements in artificial intelligence, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to announce its earnings Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, anticipating that the integration of the Gemini AI system into Google Cloud and AI Overviews in Google Search will significantly boost sales. They noted their belief that enhanced AI features across Google’s platforms will lead to increased activity in the core Search business, despite some initial challenges with the rollout of AI Overviews, which encountered scrutiny and criticism for inaccuracies. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, driven partly by AI innovations, resulting in a surge in its stock price and pushing its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of new AI product launches under the Gemini brand. Notable announcements made during the Google I/O developer conference included plans for a universal AI assistant that could interact with users through smart glasses. Google claims its new Gemini AI system is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impact of AI Overviews on revenue, he acknowledged that it could benefit Search monetization in the long run. He highlighted that AI has already begun to positively affect Google Cloud, predicting a 27% rise in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared an optimistic outlook, naming Google among the firm’s top technology stocks alongside Uber and Amazon, citing encouragement from advancements in generative AI as Alphabet approaches its second-quarter earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding AI is promising for Google, it remains uncertain whether these technologies will lead to sustained sales growth in the future.