Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advances in artificial intelligence will contribute positively to its second-quarter earnings. The parent company, Alphabet, is set to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this boost to the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search. They expressed optimism, noting that enhanced AI features across Google’s ecosystem should lead to greater activity in the Search segment, despite initial challenges with the AI Overviews, which faced criticism due to errors and inaccuracies. As a result, they have adjusted their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by its AI initiatives, which propelled its market capitalization past the $2 trillion mark, elevating it alongside giants like Apple, Microsoft, and Nvidia. The company’s strong performance was spurred by a series of AI product launches, notably during its Google I/O conference, where it introduced an advanced universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious stance regarding AI Overviews, he acknowledged the potential for these features to enhance Search monetization in the future. He also noted that AI is already positively influencing Google Cloud, forecasting a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth joined the optimistic outlook, designating Google among the top tech stock picks alongside Uber and Amazon, highlighting the encouraging progress in generative AI ahead of Alphabet’s earnings announcement. Conversely, Raymond James analyst Josh Beck cautioned that while the current perspective on Google’s AI is promising, the long-term impact on sales remains uncertain.