Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, highlighting the integration of Gemini into Google Cloud and AI Overviews within Google Search as key factors for potential sales growth. They are optimistic about the expansion of AI across Google’s ecosystem, believing it will enhance user engagement in the core Search business, despite some initial challenges with the AI Overview tool that generated online criticism due to inaccuracies. They have also raised their price target for Google’s stock from $200 to $206.
In April, Google experienced a remarkable profit increase of 60% in the first quarter, largely attributed to its AI developments. This financial success resulted in a significant rise in its stock price, allowing the company to surpass a market capitalization of $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s impressive first-quarter results came after a series of new AI product launches, including offerings showcased at the Google I/O developer conference. One of the highlights was a future AI assistant capable of interacting through smart glasses, with Google claiming its Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on AI Overviews but noted that it could eventually contribute to increased monetization of Search. He also indicated that AI is already benefiting Google Cloud, with expectations of a 27% year-over-year revenue growth in that segment.
Doug Anmuth from J.P. Morgan shared a positive outlook, identifying Google as one of their top tech stock picks, alongside Uber and Amazon, and mentioning optimism regarding advancements in Generative AI prior to the upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current sentiment surrounding Google’s AI strategy is favorable, the long-term impact on sales remains uncertain.