Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. The parent company, Alphabet, is expected to release its earnings report on Tuesday after the market closes.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google upward. Analysts Justin Post and Nitin Bansal from Bank of America attribute this positive outlook to the successful integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search, which they believe will drive sales growth.
In their research note last week, they expressed optimism about the expanding AI applications within Google’s ecosystem, indicating that a wider implementation of AI overviews could lead to increased user engagement in the core Search business. This follows earlier challenges during the rollout of AI overviews when the tool faced criticism for inaccuracies. Post and Bansal have increased their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly contributed by AI innovations, resulting in a stock price surge that pushed its market capitalization over $2 trillion, joining ranks with Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a string of releases in artificial intelligence tools, including a groundbreaking universal AI assistant that can interact with users through smart glasses. Google claims that its latest Gemini AI is 20% faster than the newest ChatGPT.
Dan Ives from Wedbush expressed a more cautious stance on AI Overviews compared to his counterparts but acknowledged its potential as a supportive factor for Search monetization in the future. He noted that AI is already enhancing Google Cloud services and, similar to other Wall Street analysts, anticipates a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan reiterated an optimistic view, naming Google among their top technology stock recommendations, alongside Uber and Amazon, citing the encouraging advancements in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Josh Beck of Raymond James cautioned that, while the current narrative regarding AI’s impact on Google appears favorable, the long-term effects on sales performance remain uncertain.