Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively influence its earnings for the second quarter, with Google’s parent company Alphabet expected to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal recently updated their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search as significant factors likely to enhance sales. They expressed optimism about the growing AI functionality across Google’s services, noting that a wider implementation of AI overviews could lead to increased engagement in the primary Search business. This came despite earlier challenges during the rollout of AI overviews, which faced some backlash for producing errors and misinformation. Consequently, they raised their price target for Google’s stock from $200 to $206.
In its first quarter, Google reported a remarkable 60% increase in profits, in part attributed to its AI initiatives, which led to a significant rise in its stock price and pushed the company’s market capitalization beyond $2 trillion, joining tech giants such as Apple, Microsoft, and Nvidia.
The company’s impressive performance in the first quarter followed multiple launches of new AI products associated with its Gemini offerings. Notably, at the Google I/O developer conference, the company introduced a futuristic universal AI assistant capable of interacting through smart glasses. Google claimed that its latest Gemini AI operates 20% faster than the newest version of ChatGPT.
Although Wedbush’s Dan Ives expressed a more cautious stance on AI Overviews compared to Post and Bansal, he indicated that it could become a beneficial factor for Search monetization over time. Ives also acknowledged that AI is already contributing to the growth of Google Cloud, predicting a 27% rise in Cloud revenue from last year, consistent with other analysts on Wall Street.
J.P. Morgan’s Doug Anmuth shared a similarly positive outlook, naming Google among its top tech stock recommendations, alongside Uber and Amazon, and expressed optimism regarding the progress of generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current AI narrative for Google looks promising, the long-term impact of AI on sales remains uncertain.