Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, anticipating that the integration of the Gemini AI into Google Cloud and the incorporation of AI Overviews in Google Search will drive sales. They noted in a recent report, “We remain positive on the growing AI integrations across Google’s ecosystem and believe a wider rollout of AI overviews will increase activity within the core Search business.” Despite some initial challenges with the AI Overviews, which faced criticism for inaccuracies, they raised their stock price target from $200 to $206.
Earlier this year, in April, Google reported a significant 60% surge in profits for the first quarter, largely attributed to AI, which propelled its stock price and market capitalization beyond $2 trillion, positioning it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results were supported by the introduction of various AI products, particularly its Gemini AI offerings. At the recent Google I/O developer conference, the company unveiled a cutting-edge universal AI assistant capable of interacting through smart glasses, claiming its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the potential of AI Overviews, he acknowledged their capacity to eventually enhance Search monetization. Ives also noted that AI is already benefiting Google Cloud and projected a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a positive outlook for Google, highlighting it as one of the firm’s top technology stocks, along with Uber and Amazon. He expressed optimism about the progress in Generative AI leading up to Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current favorable perspective on AI’s impact on Google, it remains uncertain whether these advancements will result in sustained long-term sales growth.