Google’s advancements in artificial intelligence are expected to boost its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to announce its earnings on Tuesday.
Analysts from Bank of America, Justin Post and Nitin Bansal, have lifted their revenue forecasts for Google, attributing the expected growth to the integration of its Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search. They expressed optimism about the increasing AI presence across Google’s platforms, believing that a wider implementation of AI Overviews will encourage more user engagement in core Search operations. Their target price for Google’s stock has been raised from $200 to $206, despite initial challenges during the rollout of AI Overviews, which faced ridicule online for some errors.
In April, Google reported a remarkable 60% increase in profits for the first quarter, partly driven by its AI initiatives. This strong performance led to a significant rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The impressive results from Google followed months of launching new artificial intelligence products, particularly through the Gemini AI offerings. Among the highlights from the Google I/O developer conference was the unveiling of a universal AI assistant capable of visual interaction via smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on the benefits of AI Overviews, he noted that they could potentially support monetization in Search over time. He also highlighted that AI is already positively impacting Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth reaffirmed an optimistic outlook, naming Google one of the firm’s top tech stocks, alongside Uber and Amazon, citing excitement over the progress in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI-driven narrative for Google is favorable, the long-term impact on sales remains uncertain.