Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, attributing expected sales growth to the integration of Gemini AI into Google Cloud and the AI Overviews feature in Google Search. They expressed optimism about the positive impact of increased AI integration across Google’s services, noting that a more extensive rollout of AI Overviews could lead to greater user activity in search.
Despite some challenges during the initial rollout of AI Overviews, which faced criticism for inaccuracies, they have increased their price target for Google’s stock from $200 to $206.
In the previous quarter, Google experienced a remarkable profit increase of 60%, driven in part by its AI developments, leading to a surge in its stock price and pushing the company’s market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance can be attributed to its extensive release of new AI products, particularly as part of its Gemini AI initiative. At the recent Google I/O developer conference, Google introduced a universal AI assistant capable of interacting through smart glasses. The company claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives held a more cautious view on the long-term impact of AI Overviews, he acknowledged the positive influence AI is already having on Google Cloud services. Similar to other analysts, he anticipates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook, naming Google among his firm’s top technology stocks, alongside Uber and Amazon. He highlighted the promising developments in generative AI as a reason for optimism ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is favorable, it remains uncertain whether AI will consistently boost the company’s sales in the long term.