Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings. Alphabet, the parent company of Google, is scheduled to announce its earnings on Tuesday after market hours.
Bank of America analysts Justin Post and Nitin Bansal have improved their revenue forecasts for Google, crediting the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search for driving increased sales. They expressed optimism in a research note, highlighting that expanding AI integrations across Google’s services will likely elevate user engagement in Search, despite some initial challenges faced during the rollout of AI Overviews. These tools faced criticism for inaccuracies but have still led analysts to raise their price target for Google shares from $200 to $206.
In its first-quarter report in April, Google experienced a remarkable 60% profit increase, largely attributed to its AI developments, resulting in a stock price surge that helped propel its market capitalization beyond $2 trillion, putting it in league with tech giants like Apple, Microsoft, and Nvidia.
Google’s positive earnings followed a series of AI product launches as part of its Gemini offerings, with the latest updates unveiled at the Google I/O developer conference. These included a futuristic AI assistant capable of interacting via smart glasses, and Google claims its Gemini AI is 20% faster than the current version of ChatGPT.
While Wedbush analyst Dan Ives acknowledged the potential of AI Overviews, he suggested that their long-term impact on Search monetization remains to be seen. However, he noted that AI is already positively impacting Google Cloud revenue, predicting a substantial 27% growth compared to the previous year.
J.P. Morgan analyst Doug Anmuth also expressed confidence in Google’s prospects, naming it one of the top tech stocks, alongside Uber and Amazon, and stating that he is encouraged by the advancements in Generative AI preceding Alphabet’s upcoming earnings announcement. Meanwhile, Raymond James analyst Josh Beck cautioned that while the current AI narrative is promising for Google, it remains uncertain whether this will lead to sustained long-term sales growth.