Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with the company set to release its earnings report after the market closes on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Alphabet, noting that the integration of the Gemini AI into Google Cloud and the addition of AI Overviews in Google Search is likely to enhance sales. They expressed optimism about the growth of AI within Google’s services, despite initial challenges encountered with the AI Overviews, which drew humor online due to errors in its outputs. Following this sentiment, they adjusted their price target for Google’s stock from $200 to $206.
In its first quarter, Google saw a profit spike of 60%, largely attributed to its AI developments, resulting in a significant increase in its stock price and pushing its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google has made a series of AI product releases as part of its Gemini initiative, with highlights from its recent Google I/O developer conference showcasing an advanced AI assistant designed to interact through smart glasses. The company claims its new Gemini AI outperforms the latest version of ChatGPT by 20%.
While Dan Ives from Wedbush expressed a cautious outlook regarding the immediate impact of AI Overviews, he acknowledged that over time, these features could potentially enhance search monetization. He also noted that AI is already contributing to increased revenue in Google Cloud, echoing expectations from other industry analysts of a 27% rise in Cloud revenue compared to the previous year.
Doug Anmuth of J.P. Morgan shared a similar positive view, listing Google among the firm’s top technology stock picks alongside Uber and Amazon. He expressed encouragement about the progress of generative AI ahead of Alphabet’s upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that, while the current outlook on Google’s AI capabilities is bright, it remains uncertain whether these advancements will drive sustained long-term sales growth.