Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, which Alphabet is expected to report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the use of AI overviews in Google Search as key drivers for increased sales. They expressed optimism about the growing AI integrations within Google’s ecosystem and believe that a wider deployment of AI overviews could lead to higher activity in the core Search business, despite initial challenges during the rollout that led to some humorous internet reactions. The analysts have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, significantly propelled by AI advancements, resulting in a rapid increase in stock price that pushed the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s vibrant first-quarter performance followed a series of AI product launches as part of its Gemini offerings. Notably, during the recent Google I/O developer conference, Google unveiled a next-generation universal AI assistant capable of interacting through smart glasses. The latest iteration of Gemini AI is reported to be 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives is somewhat more cautious regarding AI Overviews than Post and Bansal, he suggested that it could ultimately support Search monetization as it matures. Ives pointed out that AI is already making a significant contribution to Google Cloud, and like many analysts, he predicts a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan joined the positive outlook, designating Google as one of the firm’s top tech stocks, along with Uber and Amazon. He noted his team’s optimism regarding progress in generative AI ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term impacts on sales driven by AI remain uncertain.