Analysts at Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its financial performance for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search as key factors driving growth. They expressed optimism about the increasing AI features in Google’s services, suggesting that a wider implementation of AI overviews could stimulate greater engagement in the core Search business, despite some initial issues during the rollout that led to mockery online. The analysts have also raised their stock price target for Google from $200 to $206.
In its first-quarter report in April, Google saw a remarkable 60% profit increase, driven in part by its AI initiatives, resulting in a surge in stock price that elevated the company’s market capitalization to over $2 trillion, joining tech giants Apple, Microsoft, and Nvidia.
The robust performance in the first quarter followed a series of new AI product launches as part of the Gemini AI initiative. Notably, during the recent Google I/O developer conference, Google introduced a next-generation universal AI assistant capable of interacting through smart glasses, claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on AI Overviews, suggesting that while it may not be an immediate asset for Search monetization, it could contribute positively over time. He noted that AI is already benefiting Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, in line with other analysts’ expectations.
Doug Anmuth from J.P. Morgan shared a positive outlook and named Google as one of the firm’s top picks in technology, alongside Uber and Amazon, citing optimism about progress in generative AI ahead of Alphabet’s earnings report.
However, Josh Beck of Raymond James cautioned that while the current narrative around Google’s AI is favorable, the impact of AI on long-term sales growth remains uncertain.