Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter, with Alphabet set to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, anticipating that the integration of Gemini into Google Cloud, along with AI Overviews in Google Search, will significantly contribute to sales growth. They expressed confidence in the ongoing AI developments within Google, suggesting that a wider deployment of AI Overviews could lead to increased activity in the search segment, despite initial challenges that saw the tool generate errors and humorous online content. Consequently, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely attributed to its AI initiatives, resulting in a substantial surge in its stock price and pushing its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong performance in the first quarter came on the heels of extensive new AI product launches, particularly under its Gemini AI suite. Among the latest innovations unveiled at the Google I/O developer conference was a universal AI assistant capable of visual interaction through smart glasses. Google claims its latest Gemini AI is 20% more efficient than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed caution about the immediate impact of AI Overviews, he noted that it could eventually support monetization of Google Search. He mentioned that the AI advancements are already benefiting Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth reiterated a positive outlook, naming Google as one of its leading technology stock picks, alongside Uber and Amazon, and expressing optimism about the progress in Generative AI before Alphabet’s upcoming earnings release.
Meanwhile, Raymond James analyst Josh Beck cautioned that while the current outlook for Google’s AI strategy is favorable, the long-term effects on sales growth remain uncertain.