Analysts from Wedbush, J.P. Morgan, and Bank of America predict a strong performance for Google in the upcoming second-quarter earnings report, which is set to be released after the market closes on Tuesday. The positive outlook comes as Google’s parent company, Alphabet, has integrated AI features that are expected to enhance revenue.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, citing the successful incorporation of the Gemini AI platform into Google Cloud and AI Overviews in Google Search. They expressed optimism about the potential impact of these AI integrations on customer engagement in core Search functions. Despite initial challenges with the AI Overviews tool, which garnered online ridicule for mistakes, they raised their stock price target for Google from $200 to $206.
In its first-quarter report, Google showcased a remarkable 60% increase in profits, partially driven by its AI advancements, leading to a surge in its stock price and elevating its market capitalization over the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s encouraging first-quarter results followed the launch of a range of AI products as part of its Gemini AI initiative. Notably, during the recent Google I/O developer conference, the company introduced an advanced AI assistant capable of visual recognition through smart glasses. Google claims that the latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Dan Ives from Wedbush expressed a tempered view on the AI Overviews, suggesting it could eventually support Search monetization, he acknowledged that AI is already contributing positively to Google Cloud revenues. Analysts generally expect a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth echoed the positive outlook, naming Google among their top tech investment picks, alongside Uber and Amazon, citing encouraging developments in generative AI in anticipation of Alphabet’s second-quarter earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current trend surrounding Google’s AI is optimistic, the long-term sales impact of these technologies remains uncertain.