Google is expected to see positive impacts on its second-quarter earnings, driven by advancements in artificial intelligence, as noted by analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is set to announce its earnings on Tuesday afternoon.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, crediting the integration of the Gemini AI tool into Google Cloud and enhancements in Google Search as key factors that could raise sales. They expressed optimism about the ongoing growth of AI features within Google’s services, believing that the wider implementation of AI overviews will lead to greater user engagement in the core Search business, despite some initial challenges that made the tool the subject of online jokes. Their price target for Google stock has been adjusted from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives, which significantly boosted its stock price and enabled the company to surpass a $2 trillion market valuation, joining the ranks of other tech giants like Apple, Microsoft, and Nvidia.
Following several months of launching new AI products under its Gemini AI brand, Google’s first-quarter success included a futuristic universal AI assistant capable of interacting through smart glasses. The company claims this latest version of Gemini AI outperforms the latest ChatGPT by being 20% faster.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews, he acknowledged in a note on Monday that these features might contribute to increased monetization of Search in the long run. He also noted that AI is already positively influencing Google Cloud revenue, which he anticipates will see a 27% increase compared to the previous year.
Doug Anmuth of J.P. Morgan shared similar positive insights, listing Google among the firm’s top technology stock picks, along with Uber and Amazon, and expressing optimism about the progress of generative AI before Alphabet’s earnings release.
However, Josh Beck from Raymond James highlighted the uncertainty surrounding the long-term impact of AI on Google’s sales performance, suggesting that while current outlooks are bright, future outcomes remain to be seen.