Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance the company’s second-quarter earnings. Alphabet, Google’s parent company, is expected to unveil its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, highlighting the positive impact of integrating the Gemini AI system into Google Cloud and AI overviews in Google Search. They expressed optimism regarding the potential for AI to amplify activity in Google’s core Search business, despite some initial issues with the AI overviews tool, which received criticism for producing errors. As a result, they have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits in the first quarter, largely attributed to the success of its AI initiatives, leading to a significant rise in its stock price and boosting its market capitalization over $2 trillion, alongside industry giants like Apple, Microsoft, and Nvidia.
The company’s strong performance came on the heels of numerous artificial intelligence product launches as part of its Gemini AI series, with notable announcements made during its Google I/O developer conference, including a universal AI assistant capable of interacting via smart glasses. Google has claimed that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding AI Overviews, he noted that it could gradually support search monetization in the future. He also pointed out that AI is currently contributing positively to Google Cloud, anticipating a 27% increase in Cloud revenue compared to last year, a sentiment shared by other Wall Street analysts.
J.P. Morgan analyst Doug Anmuth mirrored the positive outlook for Google, designating it as a top technology stock within the firm, alongside Uber and Amazon, and expressing enthusiasm about the progress in generative AI prior to Alphabet’s earnings release. Conversely, Raymond James analyst Josh Beck cautioned that despite the currently favorable AI narrative for Google, the long-term impact of AI on the company’s sales remains uncertain.