Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its earnings for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, citing the successful integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search as key factors driving sales growth. They expressed confidence in the benefits of these AI integrations across Google’s ecosystem despite some early issues with the AI Overviews tool, which faced backlash for inaccuracies. As a result, they adjusted their price target for Google’s stock upwards from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, with AI playing a significant role in this jump, leading to a rise in its stock price and pushing its market capitalization beyond $2 trillion. This remarkable performance came after a series of AI product launches as part of its Gemini AI initiative, including an ambitious universal AI assistant showcased at Google I/O, which aims to work with smart glasses. Google claims its Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives showed less enthusiasm about AI Overviews than his counterparts, he noted that it might support Search monetization in the long run. He highlighted that AI is already positively impacting Google Cloud, predicting a 27% revenue increase in that segment compared to last year.
J.P. Morgan’s Doug Anmuth also shared a positive outlook, identifying Google as one of the top tech stocks alongside Uber and Amazon, and expressing optimism about the progress of generative AI ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that the long-term impact of AI on Google’s sales remains uncertain, despite the current favorable narrative surrounding the technology.