Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, with Google parent company Alphabet set to release its earnings report after the market closes on Tuesday.
Bank of America and Wedbush have revised their revenue forecasts for Google upward. Analysts Justin Post and Nitin Bansal suggest that the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search will lead to increased sales.
In a research note, they expressed optimism about the growing integration of AI across Google’s platforms, believing that the wider implementation of AI overviews will promote greater engagement in Google’s core Search operations. This comes despite earlier challenges in the AI overview rollout, which faced criticism for generating inaccuracies. Post and Bansal also adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a 60% rise in profits for the first quarter, fueled in part by its AI initiatives, which led to a substantial increase in its stock price and pushed its market capitalization past the $2 trillion threshold, joining industry giants such as Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches linked to its Gemini AI suite. Notably, during the recent Google I/O developer conference, the company unveiled a futuristic AI assistant capable of interacting with users through smart glasses. Google claims its latest Gemini AI is 20% faster than ChatGPT.
While Wedbush’s Dan Ives expressed some skepticism regarding the long-term impact of AI Overviews on revenue, he acknowledged that it could eventually benefit Search monetization. He also noted that AI advancements are already positively affecting Google Cloud, with expectations for a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth echoed the positive outlook and highlighted Google as one of the top technology investments alongside Uber and Amazon, expressing optimism about the progress in generative AI (GenAI) ahead of Alphabet’s second-quarter earnings analysis.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears favorable, the long-term impact of AI on sales is still uncertain.