Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its earnings for the second quarter, as the company prepares to release its financial results after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google, anticipating that the incorporation of Gemini into Google Cloud and enhanced AI features in Google Search will drive sales growth. Bank of America analysts Justin Post and Nitin Bansal noted that they remain optimistic about the expanding AI integrations within Google’s ecosystem. They expect that a broader implementation of AI features will increase engagement in the core Search business, despite some initial challenges faced during the rollout of AI overviews, which drew criticism on social media for inaccuracies. As a result, they upgraded their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, attributed partially to its AI initiatives, which propelled its stock price and boosted its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter performance was driven by several new AI product launches, particularly the release of its Gemini AI offerings. At the recent Google I/O developer conference, Google unveiled a visionary AI assistant designed to interact through users’ smart glasses, claiming that their latest Gemini AI is 20% faster than the most current version of ChatGPT.
While Wedbush’s analyst Dan Ives expressed caution regarding the long-term effects of AI Overviews on monetization, he noted that AI is already contributing positively to Google Cloud. He, along with many other analysts, predicts a 27% growth in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook and included Google in the list of top tech stocks for investment, along with Uber and Amazon, citing excitement over the advancements in generative AI prior to Alphabet’s upcoming earnings report. Meanwhile, Raymond James analyst Josh Beck warned that although the narrative surrounding AI for Google is currently favorable, its long-term impact on sales remains uncertain.