Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI advancements will positively impact its second-quarter earnings report, set to be released after market close on Tuesday. Google’s parent company, Alphabet, appears to be gaining momentum as it integrates AI features across its platforms.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing potential sales boosts to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search. They stated in a recent research note that they remain optimistic about the growing AI features across Google’s ecosystem and believe the rollout of AI overviews will enhance user engagement in the Search segment, despite initial challenges where the tool faced criticism for inaccuracies. They have increased their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, driven in part by its AI initiatives. This impressive performance led to a significant increase in its stock price, helping the company surpass a market capitalization of $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results followed a series of new AI product launches, including innovations presented at the Google I/O developer conference, where Google showcased a universal AI assistant designed to interact using smart glasses. The company claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the immediate impact of AI Overviews, he acknowledged their potential to support Search monetization in the long run. Ives also noted that AI is already positively influencing Google Cloud’s performance, projecting a 27% increase in Cloud revenue from the previous year.
Similarly, Doug Anmuth of J.P. Morgan indicated strong support for Google, labeling it as one of the firm’s top technology stock picks alongside Uber and Amazon, citing optimism about advancements in generative AI prior to Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that, despite the current favorable sentiment surrounding AI, the long-term effects on sales remain uncertain.