Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. The parent company of Google, Alphabet, is anticipated to unveil its earnings report after the market closes on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google, attributing anticipated sales boosts to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search. They stated in a recent research note that they are optimistic about the ongoing integration of AI across Google’s ecosystem and expect that a wider implementation of AI overviews will stimulate higher engagement in the Search sector, despite some early challenges the tool faced, which led to online ridicule. They have increased their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits during the first quarter, partially due to AI contributions. This surge led to a significant rise in its stock price, propelling the company’s market capitalization beyond $2 trillion, placing it among top firms like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results coincided with its efforts to roll out new artificial intelligence products under its Gemini offerings. Among its latest innovations presented at the Google I/O developer conference is a universal AI assistant capable of visual interaction via users’ smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
Dan Ives of Wedbush expressed a more cautious view on the potential of AI Overviews compared to Post and Bansal, suggesting that it may serve as a long-term benefit for Search monetization. However, he acknowledged that AI is already propelling growth in Google Cloud, and like many other analysts, he predicts a 27% increase in Cloud revenue year-over-year for the company.
Doug Anmuth from J.P. Morgan shared this positive outlook, naming Google as one of the firm’s top technology stocks, alongside Uber and Amazon, while expressing encouragement about the advancements in General AI ahead of Alphabet’s second-quarter earnings presentation.
On the other hand, Josh Beck from Raymond James cautioned that while the current narrative surrounding AI at Google appears favorable, the sustainability of any long-term sales growth driven by AI remains uncertain.