Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with Alphabet, Google’s parent company, set to release its earnings report after market close on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, citing the integration of AI tools such as Gemini into Google Cloud and new AI features in Google Search as key drivers for sales growth. They expressed optimism in a recent research note, suggesting that the expansion of AI features will enhance user engagement in Google’s core Search business, despite initial challenges during the rollout that attracted criticism online. They also adjusted their target price for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% surge in profits for the first quarter, significantly aided by AI, which in turn helped elevate its stock price and market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s performance was bolstered by the launch of multiple AI products under its Gemini AI branding, with recent innovations exhibited during the Google I/O developer conference featuring a futuristic AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI model outperforms the latest ChatGPT by 20% in speed.
Dan Ives from Wedbush offered a more tempered view on AI Overviews, suggesting that while its immediate impact may be limited, it could assist in monetizing Search in the long run. He also noted that AI is already having a positive impact on Google Cloud, expecting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth supported this optimistic outlook, naming Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, highlighting the encouraging developments in Generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative is favorable, the long-term effects of AI on Google’s sales remain uncertain.