Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google upwards. Analysts Justin Post and Nitin Bansal from Bank of America noted that the integration of Gemini into Google Cloud and AI Overviews in Google Search is projected to enhance sales. They expressed optimism about the increasing incorporation of AI across Google’s services and believe that a wider implementation of AI overviews will elevate user engagement in the core Search business. Despite initial challenges with AI overviews, which faced criticism for errors and inaccuracies, the analysts have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI developments, which led to a significant rise in its stock price, elevating its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
Following the release of various new artificial intelligence products as part of its Gemini series in recent months, Google showcased an ambitious universal AI assistant at its Google I/O developer conference. This assistant aims to interact through smart glasses and is claimed to be 20% more efficient than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious stance on AI Overviews compared to Post and Bansal but noted that it could foster future growth in Search monetization. He also indicated that AI is already contributing positively to Google Cloud, anticipating a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic outlook, selecting Google as one of the firm’s top tech stocks alongside Uber and Amazon, citing “encouragement from GenAI developments” leading up to Alphabet’s upcoming earnings report. However, analyst Josh Beck from Raymond James cautioned that while the current narrative around AI appears favorable for Google, the long-term impact of AI on the company’s sales remains uncertain.