Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings in 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 increased their revenue forecasts for Google, highlighting the positive impact of Gemini’s integration into Google Cloud and AI Overviews in Google Search on sales. They expressed optimism about the growing AI integration within Google’s ecosystem, believing that a wider rollout of AI overviews will lead to increased activity in Google’s core search business. Despite some early challenges with AI overviews, which generated internet humor due to inaccuracies, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, driven partly by AI advancements, resulting in a surge in its stock price and pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong performance in the first quarter followed several new AI product launches as part of its Gemini offerings. Among these was a futuristic universal AI assistant introduced during the Google I/O developer conference, designed to interact through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook regarding AI Overviews, he noted that it could potentially aid in search monetization in the long run. He also mentioned that AI is already contributing positively to Google Cloud revenue, projecting a 27% increase compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a positive outlook, identifying Google as one of the firm’s top tech stock picks, along with Uber and Amazon, and conveyed his team’s encouragement regarding progress in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI’s impact on Google is favorable, its long-term potential to drive sales remains uncertain.