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, with Alphabet, Google’s parent company, scheduled to release its earnings report Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing potential sales growth to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed their positivity about the expanding AI applications within Google’s ecosystem, predicting that a wider adoption of AI features will increase engagement in the core search business. This comes despite initial challenges with AI Overviews that led to some online mockery due to inaccuracies. The analysts also raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% jump in profits during the first quarter, significantly influenced by its AI initiatives, which caused its stock price to soar and its market capitalization to exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following months of AI product releases, Google’s positive first-quarter results were bolstered by its Gemini AI offerings. During the recent Google I/O developer conference, the company unveiled a future AI assistant capable of functioning through smart glasses. Google asserts that its latest Gemini AI performs 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed caution regarding the immediate impact of AI Overviews on overall sales, he acknowledged the potential for it to positively affect search monetization in the long run. Ives also noted that AI is already contributing positively to Google Cloud’s performance and anticipates a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared the optimistic outlook and identified Google as a top technology stock alongside Uber and Amazon, citing excitement over the advancements in Generative AI before Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that the sustainability of AI’s impact on Google’s long-term sales remains uncertain.