Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, highlighting that the company’s incorporation of Gemini into Google Cloud and the AI Overviews feature in Google Search will likely drive sales growth. They expressed optimism regarding the proliferation of AI features across Google’s operations, stating that an expanded deployment of AI Overviews could increase activity within the core Search business. Despite some initial missteps with AI Overviews—where the tool faced criticism for errors—Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable profit increase of 60%, partially attributed to its AI developments, which resulted in its stock price climbing and market capitalization exceeding $2 trillion, joining industry giants Apple, Microsoft, and Nvidia.
The company’s strong performance in Q1 was bolstered by the launch of new AI products associated with its Gemini initiative. Noteworthy releases at the recent Google I/O developer conference included a futuristic AI assistant capable of interacting through users’ smart glasses, with Google claiming its latest Gemini AI is 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the long-term impact of AI Overviews, he noted that they could eventually support revenue growth in Search. He believes that AI is already having a positive impact on Google Cloud, forecasting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also conveyed a positive outlook, listing Google among his firm’s top tech stock picks—alongside Uber and Amazon—while expressing encouragement regarding the progress in Generative AI (GenAI) as the company prepares for its second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that despite the current optimistic narrative surrounding Google’s AI strategy, the sustainability of sales growth driven by AI remains uncertain.