Google’s advancements in artificial intelligence are anticipated to enhance its earnings for the second quarter, as noted by analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts upward, crediting the integration of the AI tool Gemini into Google Cloud and the deployment of AI Overviews in Google Search for potential sales boosts. They expressed optimism about the expanding use of AI across Google’s ecosystem, believing that the broader implementation of AI Overviews will contribute to increased activity in the core search business, despite some initial issues where the tool received criticism for inaccuracies. They have increased their stock price target for Google from $200 to $206.
In April, Google reported an impressive 60% increase in profits for the first quarter, largely attributed to AI advancements, which resulted in a significant rise in its stock price and pushed the company’s market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
This strong performance coincided with a series of new AI product launches as part of Google’s Gemini AI initiative. The latest innovations showcased at the Google I/O developer conference featured an advanced AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is now 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding AI Overviews but noted in a report that it could eventually support Search monetization over time. He also remarked that AI is already positively impacting Google Cloud, with expectations of a 27% increase in revenue in this segment compared to the previous year.
Doug Anmuth of J.P. Morgan matched the optimistic outlook, identifying Google as one of the top tech stocks, alongside Uber and Amazon. He indicated that his team is encouraged by the advancements in generative AI leading up to Alphabet’s second-quarter earnings announcement.
Meanwhile, analyst Josh Beck from Raymond James cautioned that, although the current narrative surrounding AI for Google is favorable, it remains uncertain whether AI will provide a long-term sales uplift for the company.