Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements are likely to enhance its second-quarter earnings, with Alphabet, Google’s parent company, set to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of the Gemini AI technology in Google Cloud and AI Overviews in Google Search as key drivers of sales growth. They expressed optimism in a research note, emphasizing that broader AI integration across Google’s platforms would encourage more user engagement with the core Search business. Despite some initial challenges with AI Overviews, which received criticism for inaccuracies, they have raised their target stock price for Google from $200 to $206.
In its April report, Google showcased a remarkable 60% rise in profits for the first quarter, largely attributed to AI advancements. This surge led to a significant boost in the company’s stock price, elevating its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of new AI product launches under its Gemini AI suite. Notably, during the Google I/O developer conference, the company unveiled an innovative universal AI assistant designed for interaction through smart glasses. Google claims that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives exhibited a more cautious view on AI Overviews compared to his peers, he acknowledged the potential for these tools to enhance Search monetization in the long run. Ives also noted that AI is already positively impacting Google Cloud, with expectations of a 27% revenue increase from the previous year.
J.P. Morgan analyst Doug Anmuth reaffirmed a positive perspective, designating Google as one of the firm’s top tech stock recommendations, alongside Uber and Amazon. He conveyed encouragement regarding advancements in Generative AI (GenAI) as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current optimistic outlook regarding AI’s role in Google’s success, the long-term impact on sales remains uncertain.