Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will significantly influence its upcoming second-quarter earnings. Alphabet, the parent company of Google, is scheduled to announce its earnings on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They expressed optimism about the potential for broader AI integration to enhance user engagement within Google’s core Search business, despite earlier issues during the launch of AI Overviews that led to some humorous criticism online. Following their analysis, they have adjusted their price target for Google’s stock from $200 to $206.
In its first quarter report in April, Google experienced a remarkable 60% profit increase, largely attributed to its AI initiatives, leading to a stock surge that elevated its market capitalization above $2 trillion, alongside tech giants such as Apple, Microsoft, and Nvidia.
Google has consistently introduced new AI products as part of its Gemini offerings, with notable announcements at its recent developer conference, Google I/O. These innovations include plans for a universal AI assistant capable of operating through smart glasses. Google claims that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
Although Wedbush’s Dan Ives expressed more caution regarding the immediate impact of AI Overviews, he noted that they could enhance Search monetization over time and acknowledged that AI is already benefiting Google Cloud. He, along with many Wall Street analysts, projects a 27% growth in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth echoed the optimistic outlook, highlighting Google as one of their top tech stock picks, along with Uber and Amazon, while expressing enthusiasm about advancements in generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment towards Google’s AI is encouraging, the long-term impact of AI on the company’s sales remains uncertain.