Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence may positively influence its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of the Gemini AI system into Google Cloud and the AI Overviews feature in Google Search as significant contributors to potential sales growth. They expressed optimism about the increasing AI applications within Google’s ecosystem and believe that a wider implementation of AI overviews will enhance user engagement in the core Search business. This comes despite some early challenges with the AI overviews, which attracted humorous criticism online for their inaccuracies. As a result of these developments, Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In its first quarter report in April, Google experienced a remarkable 60% profit increase, aided by AI innovations. This strong performance resulted in a surge in its stock price, enabling the company to surpass a market capitalization of $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Following the successful quarter, Google has consistently rolled out new AI products as part of its Gemini offerings. Notable announcements from the Google I/O developer conference included a universal AI assistant capable of interacting through smart glasses. Google also claims its latest Gemini AI iteration is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance on the impact of AI Overviews compared to his peers, he noted the potential for these tools to eventually support Search monetization. He also highlighted that AI is already providing a boost to Google Cloud, with expectations of a 27% revenue increase from the previous year.
J.P. Morgan analyst Doug Anmuth mirrored this positive outlook, naming Google among the firm’s top technology investments, alongside Uber and Amazon. He conveyed optimism about the advancements in generative AI preceding Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI initiatives seems favorable, the long-term impact on sales remains uncertain.