Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, highlighting the positive impact of integrating the Gemini AI into Google Cloud and the AI Overviews feature in Google Search, which is expected to increase sales. They noted, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business,” despite some initial challenges with the rollout that led to public ridicule over errors generated by the feature. They have increased their price target for Google’s stock from $200 to $206.
In the first quarter of April, Google reported a remarkable 60% profit surge, driven partially by its AI initiatives, which propelled its stock price and pushed its market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed months of releasing new AI products tied to its Gemini AI suite. A highlight from its recent developer conference, Google I/O, was the introduction of a universal AI assistant designed for smart glasses. Google claims its latest Gemini AI iteration is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on the potential of AI Overviews compared to his colleagues, he acknowledged that it could enhance Search monetization in the future. Additionally, he noted that AI is already contributing positively to Google Cloud, predicting a 27% revenue increase in that sector compared to last year, a sentiment shared by many analysts on Wall Street.
J.P. Morgan analyst Doug Anmuth reinforced the optimistic outlook for Google, placing it among the firm’s top tech stock picks, alongside Uber and Amazon, as his team remains “encouraged by GenAI progress” ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI momentum is encouraging, the long-term effects of AI on Google’s sales remain uncertain.