Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet set to announce its earnings report after the market closes on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, attributing this to the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search, which they believe will increase sales. In a recent research note, they expressed optimism about the growing number of AI integrations within Google’s ecosystem, suggesting that a wider implementation of AI Overviews could drive more engagement in the core Search business, despite initial challenges that led to some humorous online backlash regarding the tool’s early errors. They have also updated their stock price target for Google, raising it from $200 to $206.
In April, Google reported a substantial profit increase of 60% in the first quarter, influenced by AI developments. Following this announcement, the company’s stock price surged, propelling its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This strong performance came after months of launching new AI products as part of Google’s Gemini AI initiative. At the recent Google I/O developer conference, the company unveiled a future universal AI assistant capable of interacting through smart glasses, claiming that the new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook regarding AI Overviews, he noted in a research note that it could contribute positively to Search monetization in the long run. Meanwhile, he highlighted that AI is already benefiting Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared a positive view and named Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing encouragement regarding the progress in Generative AI ahead of the forthcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current favorable narrative surrounding AI at Google, the long-term impact on the company’s sales remains uncertain.