Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements will contribute to a promising outlook for its second-quarter earnings, with Alphabet, Google’s parent company, set to announce results on Tuesday.
Following a turbulent week for Nvidia’s stock, analysts have adjusted their revenue forecasts for Google. Bank of America’s Justin Post and Nitin Bansal attribute the anticipated sales increase to the integration of the Gemini AI system into Google Cloud, as well as the AI Overviews feature in Google Search.
In a recent research note, they expressed optimism about AI’s growing role within Google’s ecosystem, emphasizing that a wider deployment of AI Overviews could enhance activity in Google’s core search business. This comes despite some initial challenges with the AI Overviews rollout, during which the tool faced criticism for errors and inaccuracies. Consequently, Post and Bansal raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely fueled by its AI initiatives. This surge led to a significant rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s successful first quarter followed the launch of several new AI products under its Gemini program. Notably, during its I/O developer conference, Google unveiled plans for a universal AI assistant capable of interacting through smart glasses, claiming that its latest Gemini AI is 20% faster than the current version of ChatGPT.
Wedbush’s Dan Ives expressed a more cautious stance on AI Overviews compared to Post and Bansal. However, he noted in a Monday research note that while the feature may take time to become a significant contributor to Search monetization, AI is already having a positive impact on Google Cloud. He anticipates a 27% year-over-year growth in Cloud revenue.
J.P. Morgan’s Doug Anmuth mirrored the positive outlook, naming Google among the firm’s top tech stock picks alongside Uber and Amazon. He stated that his team is “encouraged by GenAI progress” in anticipation of Alphabet’s second-quarter earnings report.
Conversely, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI appears favorable, the long-term impact of AI on the company’s sales remains uncertain.