Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will contribute positively to its second-quarter earnings report, which is due after the market closes on Tuesday.
Both Bank of America and Wedbush have increased their revenue projections for Google. According to analysts Justin Post and Nitin Bansal from Bank of America, the integration of Google’s Gemini AI into Google Cloud and AI Overviews in Search is expected to enhance sales. They expressed optimism about the expanding AI applications within Google’s services and suggested that a wider implementation of AI overviews could elevate user engagement in core Search functions. Despite some initial challenges and public backlash regarding the AI overviews’ performance, they raised their stock price forecast for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in its first quarter, aided by its AI initiatives, which led to a surge in its stock price and pushed its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results were attributed to several new AI releases, particularly its Gemini AI offerings showcased at Google I/O, including a cutting-edge universal AI assistant compatible with smart glasses. Google claims its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the potential of AI Overviews, noting they might become beneficial for Search monetization in the future, he highlighted that AI is already significantly enhancing Google Cloud’s performance. He anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic outlook, listing Google among their top tech stock picks, alongside Uber and Amazon, citing encouraging progress in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative around AI for Google appears favorable, the long-term impact of AI on the company’s sales remains uncertain.