Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Google’s 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 increased their revenue forecasts for Google, anticipating that the company’s implementation of its Gemini AI into Google Cloud and Search will significantly boost sales. They expressed confidence in the growing integrations of AI within Google’s ecosystem in a recent research note, noting that wider deployment of AI features could enhance activity in its core Search operations. Despite some challenges during the AI overviews’ initial launch, which saw the tool mocked online for errors, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit increase for the first quarter, aided in part by AI, which led to a surge in its stock price and elevated its market capitalization beyond $2 trillion, joining peers like Apple, Microsoft, and Nvidia.
The company’s positive earnings in the first quarter came on the heels of several artificial intelligence product releases as part of its Gemini AI suite. Significant announcements made during the Google I/O developer conference included a futuristic AI assistant capable of visual and verbal interaction through smart glasses. Google asserts that its latest Gemini AI is 20% quicker than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view regarding AI Overviews, suggesting it may support Search monetization over time, he acknowledged that AI is already benefiting Google Cloud. Like many Wall Street analysts, he forecasts a 27% year-over-year increase in Cloud revenue for Google.
J.P. Morgan’s Doug Anmuth echoed the optimistic outlook, naming Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He highlighted his team’s encouragement regarding advancements in GenAI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current optimistic AI narrative surrounding Google, the long-term impact of AI on the company’s sales is still uncertain.