Analysts at Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet poised to release its earnings report after the market closes on Tuesday.
After evaluating Google’s prospects, Bank of America analysts Justin Post and Nitin Bansal have raised the company’s revenue forecasts. They believe the integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search will significantly boost sales.
In their research note from last week, the analysts expressed optimism regarding AI’s growing role within Google’s ecosystem and noted that a broader introduction of AI Overviews could lead to increased activity in the Search division. This comes despite some initial setbacks, where the AI tool was ridiculed online for producing errors and inaccuracies. Consequently, they have lifted Google’s stock price target from $200 to $206.
In April, Google reported a remarkable 60% profit increase in its first quarter, a surge attributed in part to AI innovations. This impressive performance led to a jump in the company’s stock price, propelling its market capitalization past the $2 trillion threshold, alongside tech giants like Apple, Microsoft, and Nvidia.
The robust first-quarter results followed a series of new AI product launches, including features unveiled at Google I/O, such as a universal AI assistant designed to interact through smart glasses. Google asserts that its latest Gemini AI operates at 20% increased speed compared to the latest version of ChatGPT.
While Wedbush analyst Dan Ives is somewhat cautious about the impact of AI Overviews, he noted in a recent report that these developments could support Search monetization in the long run. He highlighted that AI is already contributing positively to Google Cloud’s performance, predicting a 27% revenue growth in that sector compared to last year.
Similarly, J.P. Morgan’s Doug Anmuth endorsed Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He expressed optimism regarding the progress of generative AI leading up to Alphabet’s impending earnings call.
However, Raymond James analyst Josh Beck cautioned that, despite the positive portrayal of AI within Google at present, the long-term effects on sales remain uncertain.