Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements will significantly boost its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report on Tuesday afternoon.
Following updates to Google’s revenue outlook, Bank of America analysts Justin Post and Nitin Bansal suggest that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will enhance sales. They expressed optimism in a recent research note, highlighting that the broader rollout of AI Overviews could positively impact activity in the core Search business, despite initial challenges when the tool was criticized for errors and inaccuracies. Consequently, they adjusted their price forecast for Google’s stock from $200 to $206.
In its April earnings report, Google revealed a remarkable 60% profit increase in the first quarter, partly attributed to AI innovations. This surge in profitability led to a rise in its stock price and elevated its market capitalization beyond the $2 trillion level, joining other tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed months of new AI product launches, particularly the Gemini AI offerings. At the recent Google I/O developer conference, the company introduced an ambitious universal AI assistant that aims to interact with users through smart glasses. Google asserts that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed caution regarding the impact of AI Overviews, he acknowledged their potential to support Search monetization over time and noted that AI is already enhancing Google Cloud’s performance. Other Wall Street analysts anticipate that Google will report a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also reflected the optimistic outlook, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon. He highlighted his team’s positive view on the progress of generative AI (GenAI) in anticipation of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI is favorable, the long-term effects on sales remain uncertain.