Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute to a positive outlook for its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, citing the integration of its Gemini AI into Google Cloud and enhanced AI Overviews in Google Search as key factors promoting sales growth. They expressed optimism about the increasing integration of AI across Google’s services, believing that a broader introduction of AI Overviews will stimulate more activity within the core Search segment. Despite a rocky start for the AI Overviews, which faced criticism online for errors, Post and Bansal have raised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This resulted in a significant boost to its stock price and elevated the company’s market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed several months of launching new AI products as part of Google’s Gemini offerings. Notable announcements from the recent Google I/O developer conference included a universal AI assistant capable of interacting through smart glasses, with Google claiming that its new Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the immediate impact of AI Overviews compared to his colleagues, he acknowledged that it could become a beneficial factor for Search monetization over time. He also noted that AI is already enhancing Google Cloud services, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth echoed the positive sentiment, naming Google among its top technology stock picks, along with Uber and Amazon. He expressed encouragement about the progress in generative AI as Alphabet prepares for its second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google is favorable, the long-term impact of AI on the company’s sales remains uncertain.