Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is anticipated to announce its earnings on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as key factors that will likely increase sales. They expressed their optimism regarding the broader adoption of AI throughout Google’s platform, noting that the rollout of AI overviews could potentially elevate activity in the core Search business. They adjusted their price target for Google’s stock from $200 to $206, despite earlier challenges with AI overviews, which had led to some ridicule online due to inaccuracies.
In April, Google reported an impressive 60% profit surge in the first quarter, largely driven by AI, which propelled its market capitalization over the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
This robust performance came after the introduction of several new AI tools under the Gemini AI umbrella, including a next-generation universal AI assistant showcased at the Google I/O developer conference, which is designed to interact seamlessly through smart glasses. Google claims that its latest iteration of Gemini AI outperforms the newest ChatGPT by 20%.
While Wedbush analyst Dan Ives expressed some reservations about the immediate impact of AI Overviews, he noted their potential to support Search monetization in the long run. He also highlighted that AI is contributing positively to Google Cloud’s growth, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, ranking Google among the company’s top tech stock picks, alongside Uber and Amazon, as he looks forward to the upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that the long-term effects of AI on Google’s sales are yet to be seen, despite the current favorable narrative.