Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will enhance the company’s second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market hours.
Both Bank of America and Wedbush have updated their revenue forecasts for Google. According to Bank of America’s Justin Post and Nitin Bansal, the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search are expected to boost sales significantly.
In their research note, they expressed optimism about the growing integration of AI within Google’s ecosystem, believing that a wider rollout of AI Overviews will stimulate higher engagement in the core search business. This comes despite earlier challenges with AI Overviews, which garnered some online criticism for their inaccuracies. The analysts have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by its AI initiatives. This surge caused its stock price to climb, leading to a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results were buoyed by a series of new AI product launches, particularly the Gemini AI offerings. During the Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through a user’s smart glasses, claiming that the latest version of Gemini AI is 20% faster than the most recent ChatGPT.
Wedbush’s Dan Ives expressed a more cautious perspective on AI Overviews compared to Post and Bansal, noting that while they might benefit search monetization in the long run, the results are yet to be seen. He emphasized that AI is already positively impacting Google Cloud, forecasting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic outlook, naming Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He conveyed that his team is encouraged by the progress in generative AI as Alphabet prepares to announce its second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment about AI’s impact on Google is positive, the long-term effects on sales remain uncertain.