Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, crediting the incorporation of its Gemini platform into Google Cloud and the new AI Overviews feature in Google Search for anticipated sales boosts. They express optimism about the growing integration of AI across Google’s services, suggesting that a wider implementation of AI Overviews could enhance activity in its core Search business, despite some initial challenges with the rollout that led to internet humor surrounding the tool’s errors. They have adjusted their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely due to advancements in AI, resulting in a significant rise in its stock price and elevating its market capitalization above $2 trillion, alongside Apple, Microsoft, and Nvidia.
This strong performance followed a series of new AI product releases as part of Google’s Gemini offerings. At the recent Google I/O developer conference, the company showcased a futuristic universal AI assistant capable of interacting through smart glasses, claiming that its latest Gemini AI version is 20% faster than ChatGPT.
While Dan Ives from Wedbush has a more cautious view on the AI Overviews potential compared to Post and Bansal, he acknowledged the feature might eventually strengthen Search monetization. Ives also noted that AI is already contributing positively to Google Cloud, predicting a 27% revenue increase in that segment compared to the previous year.
Doug Anmuth of J.P. Morgan shared a positive outlook, listing Google among the firm’s top tech stock picks, along with Uber and Amazon, and expressed optimism about the advancements in Generative AI ahead of Alphabet’s earnings report.
Raymond James analyst Josh Beck, however, cautioned that while the current narrative around AI at Google is encouraging, the long-term impact of AI on the company’s sales remains uncertain.