Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will contribute positively to its financial performance in the upcoming second-quarter earnings report. Alphabet, Google’s parent company, is scheduled to release its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google upwards. According to analysts Justin Post and Nitin Bansal at Bank of America, the integration of the Gemini AI system into Google Cloud and the introduction of AI Overviews in Google Search are expected to drive sales growth.
In their recent research note, they expressed optimism about the benefits of AI across Google’s platform, noting that a wider implementation of AI overviews could enhance user activity in the core Search business. This comes despite some initial challenges with AI overviews, which generated humorous commentary online due to inaccuracies. Post and Bansal have also adjusted their stock price target for Google from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, aided by its AI initiatives, resulting in a significant rise in its stock price and boosting its market valuation to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s impressive first-quarter results were driven by the rollout of new AI products stemming from the Gemini AI program. At the recent Google I/O developer conference, Google unveiled an advanced AI assistant capable of interacting through smart glasses, claiming it operates 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush expressed caution regarding the potential of AI Overviews compared to Post and Bansal, he indicated that it could ultimately support Search monetization. He also noted that AI is already positively impacting Google Cloud, with expectations of a 27% revenue increase from the previous year.
Doug Anmuth from J.P. Morgan shared similar sentiments, ranking Google among the firm’s leading tech stocks along with Uber and Amazon, and highlighting positive developments in generative AI ahead of the earnings report.
However, analyst Josh Beck from Raymond James raised a note of caution, pointing out that while the current narrative surrounding AI is positive, the long-term impact of AI on Google’s sales remains uncertain.