Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s advancements in artificial intelligence will positively influence its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search as key drivers of sales growth. They expressed optimism about the expanding use of AI within Google’s ecosystem, highlighting that a more extensive rollout of AI Overviews could lead to increased activity in Google’s core Search business. Despite some initial challenges with AI Overviews, which resulted in some humorous errors, the analysts adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% increase in profits for the first quarter, largely attributed to AI developments. As a result, the company’s stock value surged, elevating its market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
The robust performance in the first quarter was bolstered by a series of new AI product launches tied to the Gemini AI initiative. Recent announcements at the Google I/O developer conference showcased an advanced AI assistant designed to enhance user experience through smart glasses, with Google claiming its latest Gemini AI technology is 20% faster than the current ChatGPT model.
While Wedbush analyst Dan Ives displayed a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that the feature could eventually support revenue growth in Search. He pointed out that AI is already contributing positively to Google Cloud, with expectations of a 27% revenue increase in that sector compared to last year.
J.P. Morgan analyst Doug Anmuth also maintained an optimistic view, endorsing Google as one of the firm’s top technology stock picks alongside Uber and Amazon, citing encouragement from the progress in Generative AI prior to Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, although the current AI narrative appears favorable for Google, its long-term impact on sales remains uncertain.