Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements will positively impact its second-quarter earnings, with the parent company Alphabet expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism about the widespread implementation of AI features across Google, which they believe will enhance user engagement in the Search segment, despite initial challenges where AI Overviews faced criticism for inaccuracies. As a result, they adjusted their price target for Google’s stock from $200 to $206.
In its first-quarter report in April, Google experienced a remarkable 60% increase in profits, largely influenced by AI innovations. Following this success, Google’s stock surged, elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s growth was fueled by multiple AI product launches as part of its Gemini initiatives. At the recent Google I/O developer conference, Google unveiled a futuristic AI assistant capable of visual and verbal interaction through smart glasses. Claims were made that the latest version of Gemini AI is 20% faster than the current ChatGPT model.
While Wedbush analyst Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he indicated that it could enhance revenue from Search in the long run. Ives also noted that Google Cloud is already benefiting from AI, agreeing with other analysts that a 27% increase in Cloud revenue compared to the previous year is expected.
Doug Anmuth from J.P. Morgan echoed the optimistic sentiment, listing Google as one of its top tech stock picks, alongside Uber and Amazon, and expressing enthusiasm for the advancements in Generative AI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current outlook for Google’s AI efforts is promising, the long-term impact on sales remains uncertain.