Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s AI initiatives are likely to enhance its earnings for the second quarter, as the company prepares to release its financial results after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, predicting that the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search will propel sales growth. In a recent research note, they expressed optimism about the potential of AI tools to enhance activity within Google’s core Search business, even after initial challenges led to some humorous internet reactions when the AI Overviews produced inaccuracies. Consequently, they have updated their price target for Google’s stock from $200 to $206.
In its April report, Google announced a remarkable 60% increase in first-quarter profits, partly attributed to its AI advancements, which also resulted in a surge in the stock price that boosted the company’s market capitalization to over $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Following months of launching new AI products as part of its Gemini suite, Google showcased its latest offerings during its annual developer conference, Google I/O, including a futuristic AI assistant able to interact through smart glasses. Google claims this new Gemini AI is 20% quicker than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding AI Overviews, suggesting that while the tool may eventually benefit Search monetization, its immediate impact is uncertain. Ives noted that AI is already having a positive effect on Google Cloud, and he joins other analysts in anticipating a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared the optimistic outlook, designating Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He mentioned his team’s excitement regarding advancements in Generative AI ahead of Alphabet’s upcoming second-quarter earnings report. However, Josh Beck from Raymond James cautioned that, despite the favorable current narrative surrounding Google’s AI efforts, the long-term impact of AI on the company’s sales remains uncertain.