Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to disclose its earnings results after the market closes on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute this boost to the integration of Google Cloud’s Gemini and AI Overviews into Google Search, which is predicted to increase sales.
In their recent research note, they expressed optimism about the growing integration of AI within Google’s ecosystem, stating that the planned broader rollout of AI overviews is likely to enhance engagement in the core Search segment. This positive outlook comes despite initial challenges with AI overviews, which faced criticism for some inaccuracies during its debut. The analysts also raised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% increase in profits for the first quarter, driven in part by its AI initiatives, which also contributed to a rise in its stock price and pushed its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed months of launching new AI products, particularly its Gemini AI platform. At its recent developer conference, Google I/O, the company unveiled an advanced AI assistant capable of visual interaction through smart glasses. Google claims its latest AI offerings are 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives holds a slightly more cautious view on the potential impact of AI Overviews, he suggested that they could eventually support Search monetization. He highlighted that AI is already benefiting Google Cloud, anticipating a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic viewpoint, listing Google among its top tech stock picks, alongside Uber and Amazon, and expressing encouragement regarding the progress in generative AI as the company approaches its second-quarter earnings announcement.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current narrative surrounding AI is positive for Google, the long-term impact on sales remains uncertain.