Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and AI Overviews in Google Search will enhance sales significantly.
In a research note published last week, they expressed optimism about the growing integration of AI across Google’s platforms, suggesting that a broader implementation of AI overviews could stimulate increased activity in the core Search business. This optimism comes despite some initial challenges with AI overviews, which faced public scrutiny for generating errors. Post and Bansal have increased their price forecast for Google’s stock from $200 to $206.
Google experienced a remarkable 60% profit surge in the first quarter of this year, largely due to its AI advancements, which led to a jump in its stock price and elevated the company’s market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
This positive first-quarter performance was largely attributed to the launch of various AI products, including those related to the Gemini program. Notably, at the recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant designed to operate with smart glasses. Google claims its latest Gemini AI model is 20% faster than the latest version of ChatGPT.
Dan Ives of Wedbush expressed a slightly cautious view on the immediate impact of AI Overviews but acknowledged its potential as a long-term benefit for Search monetization. He also noted the positive influence of AI on Google Cloud, expecting a 27% year-over-year revenue increase in that sector.
J.P. Morgan analyst Doug Anmuth shared a similar optimistic outlook, naming Google among the firm’s top technology stock picks alongside Uber and Amazon, highlighting his team’s encouragement regarding advancements in generative AI ahead of Alphabet’s upcoming earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable for Google, the long-term effects of AI on the company’s sales remain uncertain.