Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence (AI) will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have updated their revenue forecasts for Google, with analysts Justin Post and Nitin Bansal highlighting the expected positive impact of integrating Google’s Gemini AI into Google Cloud and AI Overviews within Google Search. In a recent research note, they expressed optimism about the broader deployment of AI features, suggesting it would increase user activity in Google’s core Search operations, despite earlier issues with the AI rollout that drew some ridicule online for inaccuracies. They have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits in the first quarter, partially driven by AI innovations, which led to a surge in its stock price and raised its market capitalization beyond $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The strong performance early in the year was supported by a series of AI product launches related to the Gemini AI initiative. At its recent Google I/O developer conference, Google unveiled a future AI assistant capable of interacting through smart glasses. The company claims its new Gemini AI performs 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed more caution regarding the impact of AI Overviews on revenue, he noted that AI is already contributing positively to Google Cloud. He echoed a common prediction among analysts that Google could see a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook, designating Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He noted that there is encouragement surrounding the advancements in generative AI leading up to Alphabet’s second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that, despite the current optimistic narrative around AI, the long-term effect of AI on Google’s sales remains uncertain.