Google’s advancements in artificial intelligence are poised to enhance its second-quarter earnings, analysts from Wedbush, J.P. Morgan, and Bank of America indicate. Alphabet, Google’s parent company, is set to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this adjustment to the company’s integration of its Gemini AI into Google Cloud and the new AI overviews in Google Search, which are expected to drive sales growth.
In a recent research note, they expressed confidence in the expanding AI features throughout Google’s ecosystem, suggesting that a wider implementation of AI overviews could lead to increased engagement in its core Search business. This comes despite earlier glitches during the initial rollout of these AI overviews, which faced criticism for inaccuracies. Consequently, they raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, significantly bolstered by its AI initiatives. This strong performance propelled its stock price upwards, elevating the company’s market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following a series of new AI product launches under its Gemini AI line, Google showcased a next-generation universal AI assistant at its Google I/O developer conference, which is designed to interact via users’ smart glasses. Google claims its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding AI Overviews, stating that while it might eventually benefit Search monetization, its immediate impact remains uncertain. However, he acknowledged that AI is already contributing positively to Google Cloud, anticipating a 27% rise in Cloud revenue compared to last year, in line with other analysts’ predictions.
Doug Anmuth of J.P. Morgan also shared positive sentiments, naming Google as one of the firm’s top technology picks along with Uber and Amazon, and noted his optimism about the progress in generative AI ahead of Alphabet’s earnings report.
Despite the optimism surrounding AI, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is promising, the long-term impact of AI on driving sales remains to be seen.