Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s investments in artificial intelligence will enhance its earnings for the second quarter. Google’s parent company, Alphabet, is slated to reveal its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, citing the successful integration of Gemini into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They expressed optimism for growing AI applications within Google’s ecosystem, believing that a wider release of AI Overviews will boost activity in its core Search operations. Despite initial challenges during the rollout of AI Overviews, which drew some humorous criticism online due to mistakes, they raised their price target for Google stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to AI advancements. This resulted in a significant increase in its stock value, propelling Alphabet’s market capitalization past the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results came after multiple launches of new AI tools as part of Google’s Gemini AI offerings. Notable innovations introduced at the Google I/O developer conference included a future AI assistant capable of visual and conversational interaction through a user’s smart glasses. Google has claimed its latest Gemini AI is 20% quicker than the latest version of ChatGPT.
While Wedbush’s analyst Dan Ives expressed caution regarding the impact of AI Overviews on Search revenue, he acknowledged that AI is already enhancing Google Cloud services. Ives, along with many Wall Street analysts, anticipates a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth reinforced the positive outlook for Google, highlighting it as one of the firm’s top tech stock picks alongside Uber and Amazon, and expressed enthusiasm regarding progress in generative AI leading up to Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding Google’s AI is favorable, the long-term impact of AI on Google’s sales remains uncertain.