According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings following the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing the boost to the implementation of Gemini in Google Cloud and AI Overviews in Google Search. They express optimism regarding the integration of AI throughout Google’s services, anticipating that a more extensive deployment of AI overviews will enhance activity within the core Search business. Despite some initial challenges with the rollout, where AI Overviews faced criticism for inaccuracies, Post and Bansal have raised their price target for Google’s stock from $200 to $206.
In its first quarter, Google reported a 60% increase in profits, significantly driven by its AI initiatives. This surge in profits contributed to a rise in the company’s stock price and allowed it to surpass a market capitalization of $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
Google’s positive performance in the first quarter followed extensive launches of new AI products, particularly through its Gemini AI offerings. At its recent developer conference, Google I/O, the company unveiled a universal AI assistant capable of interacting through smart glasses; it claims this latest iteration of Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution about the potential of AI Overviews, he noted that they might support monetization of Search over time. He also indicated that AI is already positively influencing Google Cloud’s performance, predicting a 27% increase in Cloud revenue compared to the prior year.
Doug Anmuth from J.P. Morgan echoed the positive outlook and named Google among its top tech stocks, alongside Uber and Amazon, citing encouragement from progress in generative AI as the company approaches its second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative surrounding Google, the long-term impact of AI on the company’s sales remains uncertain.