Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts upward, citing the integration of Gemini into Google Cloud and AI features in Google Search as catalysts for sales growth. They expect that expanding AI functionalities will lead to increased user engagement in the core Search business, even though the initial launch of the AI Overviews faced scrutiny for generating errors and misleading information. Consequently, they raised 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 attributed to AI innovations. This surge in profits propelled its stock price upward, pushing the company’s market capitalization beyond the $2 trillion threshold, placing it alongside giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter came after multiple new artificial intelligence product releases under the Gemini AI initiative. Highlights from Google’s developer conference, Google I/O, included a next-generation AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives expressed caution regarding the future impact of AI Overviews on Search monetization, he acknowledged that AI is currently enhancing Google Cloud services. Most analysts, including Ives, anticipate a 27% year-over-year growth in Google Cloud revenue.
J.P. Morgan’s Doug Anmuth shared an optimistic outlook, naming Google as one of the investment firm’s top tech stocks along with Uber and Amazon, highlighting “encouraging” developments in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the positive current narrative surrounding AI at Google, the long-term impact on sales remains uncertain.