According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to announce its earnings following the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, crediting the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search as significant catalysts for sales growth. They expressed optimism about the ongoing AI integration across Google’s ecosystem and noted that a wider rollout of AI Overviews could lead to increased activity within the core Search business. Despite some early challenges associated with the debut of AI Overviews, which attracted ridicule online for inaccuracies, they raised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives, which propelled its stock price and drove its market valuation beyond $2 trillion, alongside companies like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter was boosted by the rollout of new AI products as part of its Gemini AI suite. Recent innovations showcased at the Google I/O developer conference included an advanced universal AI assistant capable of interacting through smart glasses. Google has claimed its latest Gemini AI outperforms the latest version of ChatGPT by being 20% faster.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews compared to other analysts but acknowledged its potential to support Search monetization over time. He also noted that AI advancements are already having a positive impact on Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared a positive outlook, ranking Google as one of the firm’s top tech investments alongside Uber and Amazon, highlighting his team’s optimism regarding advancements in generative AI just ahead of Alphabet’s earnings report.
Meanwhile, Raymond James analyst Josh Beck cautioned that while the current narrative around AI at Google is favorable, its long-term impact on sales remains uncertain.