According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its earnings report for the second quarter. Alphabet, the parent company of Google, is scheduled to announce its earnings after the market closes on Tuesday.
Analysts at Bank of America, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, attributing the expected boost to the integration of Gemini into Google Cloud and AI features in Google Search. They expressed optimism about the growing AI functionality throughout Google’s ecosystem, suggesting that an expanded rollout of AI overviews will stimulate user activity in its core Search business, despite some initial challenges with the rollout that attracted humorous criticism online. The analysts have raised their stock price target for Google from $200 to $206.
In its April earnings report, Google experienced a 60% increase in profits for the first quarter, significantly influenced by its AI initiatives. This impressive performance resulted in a surge in stock price, elevating its market capitalization beyond the $2 trillion threshold, joining the ranks of other tech giants like Apple, Microsoft, and Nvidia.
Following the release of various AI products as part of its Gemini AI strategy, Google showcased its latest developments during the Google I/O developer conference, including a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its most recent Gemini AI iteration is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush took a more cautious stance on the potential of AI Overviews compared to Post and Bansal, he noted that these features could provide a positive impact on Search monetization over time. He also stated that AI advancements are already benefiting Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth echoed the optimistic outlook, designating Google as one of the firm’s top tech stock picks, along with Uber and Amazon. He expressed confidence in the progress of Generative AI in anticipation of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the AI narrative surrounding Google is currently favorable, the long-term impact on Google’s sales remains uncertain.