Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are expected to positively influence its second-quarter earnings. The parent company Alphabet is scheduled to announce its earnings after the market closes on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have enhanced their revenue forecasts for Google, attributing this to the integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search. The analysts expressed optimism about the growing use of AI throughout Google’s services, believing that a wider release of AI Overviews will boost activity in the core Search business, despite the initial rollout facing some criticism for inaccuracies. They have increased their price target for Google’s stock from $200 to $206.
In its first quarter report from April, Google unveiled an impressive profit increase of 60%, largely driven by its AI initiatives, which resulted in a surge in stock price and lifted the company’s market valuation past the $2 trillion milestone, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s positive results for the first quarter followed months of launching new AI products under its Gemini brand, including an ambitious universal AI assistant designed for use with smart glasses. The company claims that its latest Gemini AI is 20% faster than the most recent iteration of ChatGPT.
Wedbush analyst Dan Ives exhibited a cautious outlook on AI Overviews compared to his peers, noting that while it could contribute positively to Search monetization in the long run, significant benefits may take time to materialize. He also affirmed that AI is already making a positive impact on Google Cloud, with expectations of a 27% revenue increase in that sector year-over-year.
Doug Anmuth from J.P. Morgan shared a similarly optimistic perspective, naming Google as one of their top tech stock picks alongside Uber and Amazon in light of encouraging developments in generative AI leading up to Alphabet’s second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current outlook for Google’s AI is bright, the long-term effects on sales driven by AI remain uncertain.