Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will boost its second-quarter earnings. Alphabet, Google’s parent company, is expected to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue expectations upward, attributing this to the incorporation of Gemini into Google Cloud and AI Overviews in Google Search. They maintain a positive outlook on the potential of expanding AI features across Google’s platform, suggesting that wider implementation of AI overviews could enhance user engagement in the primary Search segment. Despite some early challenges with the AI overview tool, which faced criticism for inaccuracies, they have increased their stock price forecast for Google from $200 to $206.
In April, Google reported a remarkable profit increase of 60% in the first quarter, largely driven by its AI initiatives, leading to a surge in its stock price and pushing its market value above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed a series of new AI releases, notably from its Gemini AI program. Innovations showcased during the Google I/O conference included an upcoming universal AI assistant capable of interacting through smart glasses. Google has also claimed that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious perspective on AI Overviews but acknowledged the potential for it to eventually support Search monetization. He indicated that AI is already contributing positively to Google Cloud, forecasting a 27% rise in Cloud revenue compared to the previous year, aligning with other Wall Street analysts’ predictions.
Doug Anmuth from J.P. Morgan praised Google’s performance and named it among the top tech stocks, alongside Uber and Amazon, noting optimism about the progress in generative AI leading up to Alphabet’s upcoming earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is optimistic, its long-term impact on Google’s sales remains uncertain.