Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s recent advancements in artificial intelligence (AI) will positively impact its second-quarter earnings, with the parent company Alphabet scheduled to report these earnings after market closure on Tuesday.
In their assessments, both Bank of America and Wedbush have enhanced their revenue forecasts for Google. Bank of America analysts Justin Post and Nitin Bansal attribute a significant boost in sales to the integration of Google’s Gemini AI into the Google Cloud platform and the introduction of AI Overviews in Google Search. They expressed optimism regarding these technological advancements, stating a broader implementation of AI Overviews could lead to increased activity within the core Search business, despite initial setbacks that resulted in humorous but embarrassing errors by the tool. Consequently, they raised their price target for Google’s stock from $200 to $206.
In the previous quarter, Google reported a remarkable 60% surge in profits, bolstered by its AI initiatives. This impressive financial performance resulted in a notable increase in stock price, pushing Alphabet’s market capitalization beyond the $2 trillion milestone, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results were propelled by numerous new AI product launches associated with its Gemini offerings. Among the highlights from the recent Google I/O developer conference was an innovative AI assistant capable of interacting visually and verbally through smart glasses. Google touts its latest Gemini AI as being 20% faster than the newest iteration of ChatGPT.
While Wedbush’s Dan Ives remains cautious about the immediate effects of AI Overviews on revenue, he believes it may provide favorable conditions for monetization of Search in the future. Ives also noted that AI has already had a positive impact on Google Cloud, projecting a 27% increase in cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth also shared a similar optimistic outlook, identifying Google as one of the firm’s top tech stock picks, along with Uber and Amazon, and expressing confidence in the advancements made in generative AI prior to Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI is optimistic, the long-term impact on Google’s sales remains to be seen.
In summary, the overall sentiment among analysts is hopeful, highlighting Google’s significant strides in AI technology and its potential to enhance revenue across its platforms. With the ongoing integration of AI into its services, there is a growing sense of optimism about Google’s ability to sustain this momentum in the upcoming quarters.
The future appears promising for Google, as the continued evolution of its AI capabilities could not only drive immediate gains but also lay the groundwork for long-term growth and innovative solutions in the tech industry.