Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advances in artificial intelligence will enhance the company’s second-quarter earnings. Alphabet, Google’s parent company, is set to unveil its earnings results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search as factors likely to drive sales growth. They noted, “We remain positive on growing AI integrations across Google’s ecosystem and believe a broader rollout of AI Overviews will stimulate increased activity in the core Search business,” despite initial setbacks that led to some humorous criticisms of the AI tool for generating errors. Their updated price target for Google’s stock is now $206, raised from $200.
In its first-quarter results reported in April, Google experienced a remarkable 60% increase in profits, largely attributed to its AI initiatives, which resulted in a surge in stock price and lifted the company’s market capitalization above $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter came after months of launching new artificial intelligence products, especially through its Gemini AI offerings. Among the latest announcements at the Google I/O developer conference was a universal AI assistant designed to interact via smart glasses. Google asserts that its latest Gemini AI model is 20% faster than the current version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding AI Overviews compared to Post and Bansal, stating it “may become a tailwind for Search monetization over time.” However, he noted that AI is already positively impacting Google Cloud, with expectations of a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan shared an optimistic outlook for Google, including it among the firm’s top tech stock picks, alongside Uber and Amazon, highlighting their “encouragement by GenAI progress” as they approach Alphabet’s earnings report for the second quarter.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears positive, it remains to be seen whether these advancements will lead to sustained long-term sales growth.