Google’s advancements in artificial intelligence are expected to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P.Morgan, and Bank of America. Alphabet, Google’s parent company, will report its earnings after close on Tuesday.
Bank of America’s Justin Post and Nitin Bansal, along with Wedbush analysts, have increased their revenue forecasts for Google. The integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search are seen as major contributors to this anticipated boost in sales.
“We remain optimistic about the growing integration of AI across Google’s ecosystem and believe a broader rollout of AI overviews will enhance activity in the core Search business,” Post and Bansal stated in a research note last week. They acknowledged the initial rollout of AI overviews had issues, but still raised their stock price outlook for Google from $200 to $206.
In the first quarter, Google reported a 60% increase in profits, partly driven by AI. This result caused its stock to rise, pushing the company’s market capitalization past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a period of launching new AI products under its Gemini AI offerings. Notable releases from its developer conference, Google I/O, included a universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the newest ChatGPT.
Wedbush’s Dan Ives acknowledged that AI Overviews may not have immediate significant impacts but could support Search monetization over time. He noted that AI is already benefiting Google Cloud, predicting a 27% increase in Cloud revenue from last year.
Similarly, J.P.Morgan’s Doug Anmuth listed Google among their top tech stocks, alongside Uber and Amazon. He expressed confidence in the progress of GenAI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is positive, the long-term impact of AI on Google’s sales remains uncertain.