Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, citing the integration of its Gemini AI technology into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They noted in a recent research report that they remain optimistic about AI integration across Google’s ecosystem and believe a wider adoption of AI Overviews will enhance engagement in the core Search business, despite some initial challenges when the tool faced criticism for errors. Consequently, they have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to its AI initiatives, leading to a significant rise in its stock price and elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed the rollout of various new AI products under its Gemini branding. At the recent Google I/O developer conference, the company unveiled plans for a universal AI assistant that could interact through users’ smart glasses, boasting that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews compared to his counterparts, he acknowledged the potential for these AI advancements to eventually fuel monetization within the Search segment. He also recognized that AI is currently benefiting Google Cloud, anticipating a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth echoed the positive sentiment and highlighted Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, expressing optimism regarding advancements in Generative AI ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current AI developments for Google appear promising, the long-term impact on sales remains uncertain.