Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s second-quarter earnings, attributing potential growth to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is slated to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, noting that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search is likely to enhance sales. They expressed confidence in the ongoing incorporation of AI across Google’s platform and believe that further deployment of AI Overviews will increase activity in its core Search segment. This comes despite the initial challenges faced during the rollout of AI Overviews, which garnered attention for producing inaccuracies and errors. The analysts have raised their price prediction for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% profit surge for the first quarter, significantly supported by AI advancements, which led to a considerable increase in its stock price and propelled its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance is attributed to months of new AI product launches under the Gemini brand, including highlights from the recent Google I/O developers conference, where a next-gen AI assistant was showcased that could interact visually and verbally through smart glasses. Google has claimed that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he still believes it could ultimately benefit Search monetization in the long run. He also noted that AI is already having a favorable effect on Google Cloud, anticipating a 27% year-over-year revenue increase for that segment.
J.P. Morgan’s Doug Anmuth mirrored the positive outlook and identified Google as one of the firm’s leading tech stock picks, alongside Uber and Amazon, citing optimism about its generative AI advancements in the lead-up to Alphabet’s quarterly earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current positive narrative surrounding Google’s AI developments, it remains uncertain whether these advancements will sustain long-term sales growth for the company.