Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as factors likely to boost sales. They expressed optimism about the growing presence of AI in Google’s ecosystem, suggesting that a broader deployment of AI Overviews could significantly increase activity in the core Search business, despite some initial challenges during the rollout.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives, which resulted in a surge of its stock price and elevated the company’s market capitalization beyond $2 trillion, joining industry giants like Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed several releases of new AI products, particularly within its Gemini AI offerings. Notably, during the Google I/O developer conference, the company unveiled plans for an advanced AI assistant capable of functioning through a user’s smart glasses. Google claims its latest AI model is 20% faster than the latest version of ChatGPT.
While Dan Ives of Wedbush expressed cautious optimism regarding AI Overviews, suggesting they may eventually benefit Search monetization, he noted that AI is already having a positive impact on Google Cloud. Similar to other Wall Street analysts, he anticipates a 27% growth in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan reinforced this positive outlook, naming Google among the firm’s top technology stocks along with Uber and Amazon, indicating encouragement from the progress in generative AI ahead of Alphabet’s second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that although the current AI narrative around Google appears promising, the long-term impact of AI on the company’s sales remains uncertain.