Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings in the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Amidst a notably volatile week for Nvidia’s stock, 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, along with AI Overviews in Google Search, will drive increased sales.
In a recent research note, they expressed optimism regarding the expanding use of AI within Google’s ecosystem, asserting that a wider adoption of AI overviews could enhance activity in its core Search business. This comes despite earlier challenges during the rollout of AI overviews, which faced criticism for errors and inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, partly attributed to its AI initiatives. This surge propelled the company’s stock price and elevated its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results are reflective of recent launches of new AI products under its Gemini offerings. At the Google I/O developer conference, the company unveiled a futuristic AI assistant capable of visual and verbal interaction through smart glasses, asserting that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance on AI Overviews compared to Post and Bansal, he acknowledged the potential for these tools to eventually enhance Search monetization. He also noted that AI has already positively impacted Google Cloud, anticipating a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, naming Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressing encouragement over the progress in generative AI ahead of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that despite the current favorable AI narrative for Google, the long-term effects of AI on sales growth remain uncertain.