Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s advancements in artificial intelligence will enhance its financial performance for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report soon.
In light of Google’s innovative AI solutions, Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue projections for the company. They highlight the integration of the Gemini AI platform into Google Cloud and the implementation of AI Overviews in Google Search as drivers for increased sales. They expressed optimism in a recent research note, stating that expanding AI capabilities across Google’s services will likely stimulate more activity within its core Search business, despite initial challenges during the rollout of AI Overviews, which faced criticism for inaccuracies. Consequently, they adjusted their price forecast for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable profit increase of 60% in the first quarter, largely attributed to its AI innovations, leading to a significant rise in its stock price and pushing its market capitalization above $2 trillion, joining industry giants like Apple, Microsoft, and Nvidia.
Google’s successful first quarter was driven by the launch of new AI products under its Gemini initiative, showcased during its recent Google I/O developer conference, which introduced a cutting-edge AI assistant capable of interacting via smart glasses. Google claims that the latest version of Gemini AI operates 20% faster than the most recent iteration of ChatGPT.
While Wedbush’s Dan Ives holds a somewhat less optimistic view on AI Overviews compared to Post and Bansal, he acknowledged their potential to enhance Search monetization over time. Moreover, he noted that AI is already positively impacting Google Cloud, with a consensus among analysts that the company will report a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth also shared a positive outlook regarding Google’s prospects, naming it as one of the firm’s top technology stock picks, alongside Uber and Amazon, expressing his team’s enthusiasm for the advancements in generative AI ahead of the upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the current optimistic narrative surrounding AI, it remains uncertain whether it will lead to sustained sales growth for Google in the long run.