Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will positively impact its upcoming second-quarter earnings report. The parent company Alphabet is scheduled to announce its earnings after market close on Tuesday.
Analysts from Bank of America and Wedbush have increased their revenue forecasts for Google, attributing this boost to the successful integration of the Gemini AI system into Google Cloud and enhanced AI features in Google Search. Justin Post and Nitin Bansal from Bank of America highlight that a wider deployment of AI overviews is likely to encourage greater user engagement in the Search segment. Despite initial challenges with the AI overview tool that led to some humorous online responses due to inaccuracies, they have raised Google’s stock price target from $200 to $206.
In April, Google recorded a remarkable 60% surge in profits for the first quarter, aided by its AI initiatives, which resulted in a significant rise in its stock price and pushed the company’s market valuation past the $2 trillion mark, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
This strong performance in the first quarter followed a series of new AI product launches, particularly those associated with the Gemini AI suite. One notable introduction at the Google I/O developer conference was a universal AI assistant capable of visual and verbal interaction through smart glasses. Google asserts that its Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Dan Ives from Wedbush expressed a more cautious view on AI Overviews, he acknowledged that it could eventually benefit Search monetization. He also noted that AI is already enhancing Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year, a sentiment echoed by other Wall Street analysts.
Doug Anmuth from J.P. Morgan shared similar optimism, identifying Google as one of the firm’s top technology stock picks alongside Uber and Amazon, citing positive developments in generative AI ahead of Alphabet’s earnings report. However, analyst Josh Beck from Raymond James cautioned that the long-term impact of AI on Google’s sales remains uncertain, despite the favorable short-term narrative surrounding the technology.