Google’s artificial intelligence initiatives are expected to enhance its earnings for the second quarter, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is scheduled to announce its earnings after the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the addition of AI Overviews in Google Search as key drivers for increased sales. They expressed optimism that a wider implementation of AI tools would boost activity in Google’s core Search business, despite initial challenges where AI Overviews faced scrutiny for errors. They also adjusted their price target for Google’s stock from $200 to $206.
In its first quarter, Google reported a significant profit increase of 60%, partly attributed to AI advancements, which resulted in a surge in its stock price, elevating its market capitalization beyond $2 trillion and placing it alongside Apple, Microsoft, and Nvidia.
The company’s successful first quarter followed a series of new AI product launches, particularly from its Gemini AI portfolio. Notable announcements from the Google I/O developer conference included a future AI assistant capable of seeing and conversing through users’ smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives was somewhat cautious regarding the long-term impact of AI Overviews, he noted that AI is already enhancing Google Cloud services and expects a 27% increase in Cloud revenue year-over-year. J.P. Morgan’s Doug Anmuth shared a positive outlook for Google, highlighting its status as one of their top tech stock picks alongside Uber and Amazon, fueled by promising developments in General AI.
However, Raymond James analyst Josh Beck cautioned that although the current sentiment surrounding Google’s AI strategy is favorable, the long-term effects on sales are yet to be determined.