Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in AI will enhance its earnings for the second quarter, as Alphabet is due to announce its earnings Tuesday evening.
In particular, Bank of America analysts Justin Post and Nitin Bansal have revised their revenue expectations for Google. They believe the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will lead to increased sales. They expressed optimism about the growing AI features within Google’s ecosystem, asserting that a wider implementation of AI Overviews will likely stimulate higher activity in the core Search business, despite some initial glitches that garnered amusement on the internet. Consequently, they raised their price forecast for Google shares from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, driven in part by its AI innovations, resulting in a stock price surge and elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results were attributed to a series of new AI products announced during its large developer conference, Google I/O. Among these was a universal AI assistant that can interact through smart glasses. Google claims its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
Dan Ives from Wedbush exhibited a more cautious viewpoint regarding AI Overviews but acknowledged that it could potentially benefit Search monetization in the long run. Ives noted that AI is already positively impacting Google Cloud, forecasting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also reiterated a positive outlook and highlighted Google as a top tech stock, alongside Uber and Amazon, expressing enthusiasm for the advancements in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable, its long-term impact on Google’s sales remains uncertain.