Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. The parent company, Alphabet, is expected to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, highlighting the positive impact of AI integrations, particularly the implementation of Gemini in Google Cloud and AI Overviews within Google Search. They expressed confidence in the potential for a broader rollout of AI overviews to elevate user engagement in the Search segment, despite initial challenges that led to some comedic online responses to the new tool’s inaccuracies. They have adjusted their price target for Google’s stock upward from $200 to $206.
In April, Google announced a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives, causing its stock price to surge and its market capitalization to exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This robust performance came on the heels of several new artificial intelligence products launched as part of Google’s Gemini offerings. Notably, at its recent developer conference, Google introduced a universal AI assistant capable of visual and verbal interaction using smart glasses. The company claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Wedbush analyst Dan Ives, while not as enthusiastic about AI Overviews as Post and Bansal, indicated that they may positively influence Search monetization in the long run. He also noted that AI is already contributing to the growth of Google Cloud, with expectations of a 27% revenue increase for the division compared to last year.
Similarly, J.P. Morgan’s Doug Anmuth expressed a positive outlook, naming Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, citing anticipation regarding advancements in Generative AI before Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI appears promising, the long-term effects on sales driven by AI remain uncertain.