Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will contribute to a favorable second-quarter earnings report, with Alphabet scheduled to announce its results on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for the tech giant. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and AI Overviews in Google Search will significantly enhance sales.
In a recent research note, they expressed confidence in the growing AI capabilities across Google’s platforms, noting that a wider deployment of AI Overviews could lead to increased activity in the Search segment. This optimism persists despite initial challenges faced by AI Overviews, which received criticism for errors and misinformation during its rollout. Consequently, they have raised the price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, driven partly by its AI efforts, which helped elevate its stock price and market capitalization above the $2 trillion threshold, joining Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed the launch of several new AI products under the Gemini AI branding. At the recent Google I/O developer conference, the company showcased a universal AI assistant that can visualize and communicate through smart glasses, claiming that the new Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush was slightly more cautious regarding the impact of AI Overviews, he acknowledged that it could support Search monetization in the long run. He highlighted that AI is already having a positive effect on Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth shared a similar optimistic outlook, naming Google as one of the firm’s top technology stock picks last week, alongside Uber and Amazon. He expressed encouragement about the advancement of generative AI ahead of Alphabet’s quarterly earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current positive AI narrative surrounding Google, the long-term impact of AI on the company’s sales remains uncertain.