According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, the parent company of Google, is scheduled to report its earnings after the market closes on Tuesday.
Analysts from Bank of America, Justin Post and Nitin Bansal, have raised their revenue forecasts for Google. They emphasize that the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search are expected to significantly boost sales. They stated that the ongoing deployment of AI across Google’s ecosystem, particularly the expansion of AI overviews, is likely to increase user engagement with the core Search business. Despite some initial challenges—where AI overviews received criticism for errors—Post and Bansal have raised their price target for Google’s stock from $200 to $206.
Moreover, Google reported an impressive 60% increase in profits in the first quarter, partly attributable to its AI developments. This surge in profits has led to a rise in its stock price, pushing the company’s market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s successful performance in the first quarter followed a series of new artificial intelligence product launches, particularly its Gemini AI suite, which was highlighted at the recent Google I/O conference. Notably, Google introduced a cutting-edge AI assistant capable of visual and verbal communication through smart glasses, claiming that Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives showed some skepticism regarding the immediate benefits of AI Overviews, he acknowledged their potential as a future asset for Search revenue. He also noted that AI is already making a positive impact on Google Cloud, predicting a 27% growth in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth also expressed optimism and identified Google as one of the top tech stocks for investment, alongside Uber and Amazon, expressing encouragement over the advancements in generative AI in anticipation of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is positive for Google, the long-term impact on sales remains to be seen.
In summary, the consensus among analysts is largely optimistic regarding Google’s integration of AI technologies, projecting growth in revenue and an overall positive performance as the company prepares for its upcoming earnings announcement. As businesses increasingly leverage AI capabilities, Google appears well-positioned to capitalize on this trend, offering hope for sustained growth and innovation in the tech sector.