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 the parent company Alphabet scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that integrating the Gemini AI into Google Cloud and adding AI Overviews to Google Search will drive increased sales.
In a recent research note, they expressed optimism about the ongoing AI integration within Google’s ecosystem, suggesting that the wider rollout of AI overviews would likely boost activity in the core Search business. This optimism persists despite early challenges encountered during the initial rollout of AI Overviews, which were mocked online for producing errors. Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In its April report, Google announced a striking 60% increase in first-quarter profits, partially attributable to AI advancements. This resulted in a surge in the company’s stock price, elevating its market capitalization above $2 trillion and placing it alongside industry giants such as Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed a series of new AI product launches under its Gemini initiative. Notable announcements from the recent Google I/O developer conference included plans for a universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% quicker than the newest version of ChatGPT.
While Dan Ives at Wedbush is somewhat more cautious about AI Overviews compared to Post and Bansal, he acknowledged that they could eventually benefit Search monetization. He also noted the positive impact of AI on Google Cloud and, like many on Wall Street, anticipates a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared a similar optimistic view, recognizing Google as one of their top tech stock picks, along with Uber and Amazon. He highlighted the encouraging developments in Generative AI as Alphabet approaches its second-quarter earnings report.
However, Josh Beck from Raymond James cautioned that although the current AI narrative around Google is positive, the long-term effects of AI on sales growth remain uncertain.