Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advances in artificial intelligence will enhance its earnings performance in the second quarter. Google parent company Alphabet is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews within Google Search as key drivers for increased sales. In a recent research note, they expressed optimism about the rollout of AI integrations and how they could boost activities in Google’s core Search business, even amid some initial challenges when AI overviews were mocked online for inaccuracies. Their forecast for Google’s stock price has been raised from $200 to $206.
In its previous quarterly report in April, Google revealed a 60% profit increase, largely attributed to AI developments. This strong performance led to a surge in its stock price, resulting in a market capitalization surpassing $2 trillion, placing Google alongside Apple, Microsoft, and Nvidia.
Google’s growth in the first quarter followed extensive releases of new AI products, especially under its Gemini AI offerings. The company showcased a futuristic universal AI assistant during its Google I/O developer conference, designed to interact through smart glasses. According to Google, its latest Gemini AI model operates 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was less enthusiastic about the short-term impact of AI Overviews compared to Post and Bansal, he noted that they could eventually benefit Search monetization. Ives also mentioned that AI advancements are already positively impacting Google Cloud, with expectations of a 27% revenue increase year-over-year from Cloud services.
J.P. Morgan analyst Doug Anmuth shared a similarly hopeful perspective, ranking Google among the firm’s top technology stocks (alongside Uber and Amazon) and highlighting the promising developments in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that although the current narrative around AI is favorable for Google, the long-term effects on the company’s sales remain uncertain.