Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s artificial intelligence advancements will enhance its second-quarter earnings, as Alphabet prepares to release its earnings after market hours on Tuesday.
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Both Bank of America and Wedbush have raised their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America expect the integration of the Gemini AI technology into Google Cloud and AI Overviews in Google Search to significantly increase sales.
They expressed optimism in a recent research note, stating, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite some early challenges with AI Overviews, which initially faced criticism for generating errors and inaccuracies. Following their analysis, Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by its AI innovations. This resulted in a substantial rise in the company’s stock price, elevating its market capitalization to over $2 trillion, aligning it with tech giants like Apple, Microsoft, and Nvidia.
The successful first-quarter results followed a series of launches of new AI products included in the Gemini AI suite. Notably, at its recent Google I/O developer conference, Google introduced a universal AI assistant capable of visual and audio interaction through smart glasses. The company also claims that its latest Gemini AI model operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a slightly more cautious view regarding AI Overviews, suggesting in a Monday note that it could serve as a long-term boost for Search monetization. He points out that AI is already positively impacting Google Cloud, forecasting a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth has echoed this positive outlook, designating Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He highlighted encouragement surrounding GenAI’s progress in anticipation of Alphabet’s quarterly earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative for Google seems favorable, the long-term impact of AI on the company’s sales remains uncertain.