Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after the markets close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing this to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They believe that the broader implementation of AI Overviews will enhance user engagement in Google’s core search functions, despite some initial challenges that led to public scrutiny of the tool’s effectiveness. As a result, they have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, aided significantly by its AI initiatives, which propelled its stock price and pushed its market capitalization beyond the $2 trillion threshold, joining industry giants like Apple, Microsoft, and Nvidia.
Google has consistently launched new AI products as part of its Gemini AI initiative, with notable announcements made at its Google I/O developer conference. These include a futuristic universal AI assistant capable of visual interaction through smart glasses, with the company claiming that its latest Gemini AI is 20% faster than ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, suggesting they may provide a gradual benefit for search monetization, he acknowledged that AI is already enhancing Google Cloud’s performance. He, along with other analysts, anticipates a 27% year-over-year growth in Cloud revenue.
J.P. Morgan analyst Doug Anmuth has also shared an optimistic view, listing Google among the top tech stocks alongside Uber and Amazon, highlighting the positive developments in generative AI leading up to Alphabet’s earnings release. However, Raymond James analyst Josh Beck cautioned that while the current AI momentum appears favorable, the long-term impact on Google’s sales remains uncertain.