Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI developments will enhance its second-quarter earnings, as Alphabet prepares to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, noting that the integration of the Gemini AI system into Google Cloud and AI Overviews in Google Search will likely drive sales growth. They expressed optimism in a recent research report, stating that the broader implementation of AI features is expected to invigorate activity in the core Search business, despite some early challenges associated with the AI Overviews tool.
In its first-quarter earnings, Google reported a remarkable 60% profit increase, largely attributed to its AI initiatives, resulting in a significant rise in its stock price and elevating its market capitalization to over $2 trillion, joining the ranks of tech giants like Apple and Microsoft.
Following the launch of the Gemini AI products, which include a futuristic AI assistant, Google demonstrated substantial innovation at its Google I/O developer conference. The new Gemini AI is claimed to outperform the latest ChatGPT by being 20% faster.
While Dan Ives from Wedbush holds a more cautious view on the immediate impact of AI Overviews, he still recognizes its potential to benefit Search monetization in the future. He also mentioned that AI is already yielding positive results for Google Cloud, forecasting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth has similarly expressed confidence in Google’s prospects, categorizing it as one of the top tech stocks along with Uber and Amazon, emphasizing optimism regarding the progress made in generative AI ahead of the upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that although the current AI narrative for Google seems promising, the long-term impact on sales remains uncertain.