Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have updated their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America have highlighted the benefits of integrating the Gemini AI into Google Cloud and AI Overviews in Google Search to boost sales. They expressed optimism about the growing applications of AI within Google’s services, suggesting that a wider implementation of AI Overviews could increase user engagement in the Search sector. This optimism remains intact despite some initial issues with AI Overviews that led to humorous online critiques due to errors and inaccuracies. They has consequently adjusted their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, in part attributed to its AI initiatives. This strong performance led to a significant rise in its stock price, propelling the company’s market value past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first quarter followed a series of AI-related product launches, including notable announcements during the Google I/O developer conference. These included a forward-looking universal AI assistant that could interact via smart glasses, and the company asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives of Wedbush expressed a more cautious stance on AI Overviews in comparison to Post and Bansal but noted that it could eventually benefit Search monetization. He believes that the advancements in AI are already positively affecting Google Cloud, with expectations of a 27% year-over-year revenue increase in that segment.
Doug Anmuth from J.P. Morgan shared similar sentiments, ranking Google among his firm’s top tech stocks alongside Uber and Amazon, and praised the progress in generative AI ahead of Alphabet’s upcoming earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while Google’s current AI narrative appears favorable, the long-term impact of AI on sales growth remains uncertain.