Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal upgraded their revenue forecasts for Google, attributing this to the integration of the Gemini AI system into Google Cloud and the AI Overviews feature in Google Search, which they believe will drive sales growth.
In their research note, they expressed optimism about the increasing presence of AI within Google’s ecosystem, suggesting that a wider deployment of AI overviews could generate more activity in the company’s core Search operations. This comes despite some initial challenges with the AI overviews, which garnered media attention due to inaccuracies. They raised the target price for Google stock from $200 to $206.
Earlier this year, Google reported a significant 60% rise in profits for the first quarter, largely driven by AI, leading to a sharp increase in its stock price and pushing the company’s market capitalization above $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of new AI product launches as part of its Gemini AI initiative. Highlights from its recent developer conference, Google I/O, included an advanced AI assistant capable of interacting through smart glasses. Google claims the latest version of its Gemini AI operates 20% faster than the most recent ChatGPT model.
While Wedbush’s Dan Ives was more cautious regarding the impact of AI Overviews, he acknowledged that it could eventually benefit Search monetization. He also noted that AI has positively affected Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth affirmed a favorable outlook, naming Google as one of the top tech stocks alongside Uber and Amazon, highlighting excitement about advancements in generative AI as the company prepares to announce its second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that despite the current optimistic AI narrative surrounding Google, the long-term impact on sales remains uncertain.