Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its earnings in the second quarter. Google’s parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key sales drivers. They expressed optimism about the growing AI features across Google’s platform, believing a wider rollout of AI overviews could enhance user engagement in the core Search business, despite some initial challenges the tool faced, which led to humorous takes online. Their price target for Google’s stock has been raised from $200 to $206.
In its April report, Google showcased a remarkable 60% increase in profits for the first quarter, partially attributed to its AI initiatives. This performance propelled the company’s stock price upward, elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
After several months of launching new AI products, Google experienced a robust first quarter. Among its latest innovations announced at the Google I/O developer conference was a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its new Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed caution regarding AI Overviews’ immediate impact, he acknowledged its potential to benefit Search monetization in the future. He also noted 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 the optimistic outlook, listing Google among its top tech stock picks, alongside Uber and Amazon, and noted the firm’s excitement regarding the advancements in Generative AI as Alphabet approaches its second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is favorable, the long-term effects on sales remain uncertain.