Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its performance in the upcoming second-quarter earnings report. Alphabet, Google’s parent company, is expected to disclose its earnings on Tuesday after market hours.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search as key factors for boosting sales.
In a recent research note, the analysts expressed optimism about the growing role of AI within Google’s operations, stating that a broader rollout of AI Overviews could lead to increased engagement in its core Search business. This comes despite some initial challenges with the AI Overviews feature, which had faced criticism online due to inaccuracies. As a result, Post and Bansal upgraded their price target for Google’s shares from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI innovations, which also helped elevate its stock price and push its market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company has been rolling out various AI products as part of its Gemini offerings, including a sophisticated universal AI assistant demonstrated at the recent Google I/O developer conference. This new AI is reported to be 20% faster than OpenAI’s latest ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he still acknowledged their potential to enhance Search monetization over time. He also indicated that AI is positively impacting Google Cloud, forecasting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth supported the bullish sentiment around Google, naming it one of the top tech stocks along with Uber and Amazon, and noted that his team is optimistic about the progress of generative AI as they approach the earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current optimistic narrative surrounding AI, it remains uncertain whether these innovations will consistently drive long-term sales growth for Google.