Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to release its earnings report on Tuesday.
Both Bank of America and Wedbush have updated their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America see the integration of Gemini within Google Cloud and AI Overviews in Google Search as key elements that will elevate sales.
In their recent research note, they expressed optimism about the increasing integration of AI across Google’s ecosystem and noted that a wider implementation of AI overviews is likely to boost user engagement in their core Search business. This comes despite earlier difficulties with the initial deployment of AI overviews, which faced public criticism for generating errors and inaccuracies. As a result, Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In its April earnings report, Google experienced a remarkable 60% profit increase in the first quarter, attributable in part to its AI initiatives. This impressive performance led to a rise in stock price, propelling the company’s market value beyond $2 trillion, aligning it with industry giants like Apple, Microsoft, and Nvidia.
Following extensive new AI product launches, Google’s strong first-quarter results mirrored the themes highlighted during its recent developer conference, Google I/O. At the conference, Google unveiled a cutting-edge universal AI assistant capable of visually communicating through a user’s smart glasses. The company claims its newest Gemini AI operates 20% faster than the latest version of ChatGPT.
Meanwhile, Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews but acknowledged their potential as a long-term benefit for Search monetization. He also noted that AI is already contributing to the growth of Google Cloud. Ives, along with other analysts, anticipates a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan mirrored this optimistic outlook, identifying Google as one of their top technology stock picks, alongside Uber and Amazon. He expressed optimism regarding Google’s progress in generative AI ahead of the upcoming second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current positive AI narrative surrounding Google, the long-term impact of AI on driving sales growth remains uncertain.