Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will boost its second-quarter earnings. The parent company, Alphabet, is set to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as key sales drivers. They expressed optimism about the impact of AI on Google’s core Search business, despite some initial challenges with the AI overviews that generated internet jokes due to inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely attributed to AI developments. This financial success led to a surge in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results coincided with the launch of new AI products, including innovations showcased at the Google I/O developer conference. Among these is a universal AI assistant designed to facilitate interaction through smart glasses, and Google claims that its latest version of Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he noted that it could contribute positively to monetizing Search over time. Ives also highlighted that Google Cloud is already experiencing enhanced performance from AI, projecting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth echoed these optimistic views, citing Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He emphasized encouragement from advancements in generative AI in anticipation of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative surrounding Google, the long-term impact of AI on the company’s sales remains uncertain.