Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s focus on artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google. They anticipate that the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search will significantly boost sales. They expressed confidence in the expanding AI capabilities across Google’s platforms and expect the rollout of AI overviews to increase user engagement in Google’s core Search business. Despite initial challenges with AI Overviews, which faced criticism for inaccuracies, they raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to its AI initiatives, resulting in a significant increase in its stock price and market capitalization, surpassing $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Following the launch of new AI products as part of its Gemini offerings, Google’s performance during the first quarter was a positive indicator. The company showcased its latest advancements at the Google I/O developer conference, introducing a universal AI assistant capable of interacting through smart glasses. Google claims its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the impact of AI Overviews compared to other analysts, he noted that these features could become beneficial for Search monetization over time. Ives also highlighted the ongoing positive impact of AI on Google Cloud, projecting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared an optimistic outlook, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon, citing progress in Generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current sentiments around AI for Google are favorable, its long-term effect on sales remains uncertain.