Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s integration of artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report Tuesday after market close.
Both Bank of America’s Justin Post and Nitin Bansal have increased their revenue forecasts for Google. They believe that the incorporation of Gemini into Google Cloud and the AI Overviews in Google Search will lead to higher sales. In their research note last week, they expressed optimism about the expanding AI capabilities throughout Google’s services, noting that the broader rollout of AI Overviews is expected to drive more activity in the core Search division. This comes despite initial challenges during the rollout of AI Overviews, which faced criticism for producing errors. As a result, Post and Bansal raised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% profit increase in the first quarter, significantly propelled by its AI initiatives. This remarkable performance resulted in a surge in its stock price, elevating its market capitalization above $2 trillion, joining tech giants such as Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches as part of its Gemini AI program. At its recent developer conference, Google I/O, the company showcased a universal AI assistant capable of functioning through smart glasses. Google claims that the new Gemini AI operates 20% faster than the latest version of ChatGPT.
Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews than his counterparts Post and Bansal but mentioned that it could serve as a supportive factor for Search monetization in the long run. He also noted that AI has already begun to positively impact Google Cloud, anticipating a 27% revenue increase in that sector compared to last year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic view, categorizing Google as one of its top technology stock picks, along with Uber and Amazon. He highlighted his team’s encouragement regarding Google’s progress in generative AI ahead of the upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI efforts is favorable, the long-term impact on sales remains uncertain.