Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings performance. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts upward for Google, citing the integration of the Gemini AI into Google Cloud and the launch of AI Overviews in Google Search as key drivers for sales growth. They expressed optimism regarding the expanding use of AI across Google’s ecosystem, believing that a wider implementation of AI overviews will increase engagement in the core Search business, despite some initial challenges where the tool faced criticism for errors. They have raised their price target for Google’s stock from $200 to $206.
In its April earnings report, Google revealed a 60% profit increase in the first quarter, largely due to its AI initiatives, which propelled its stock price upward and increased its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance came on the heels of its launch of various AI products under its Gemini AI umbrella. Highlights from its recent developer conference, Google I/O, included the introduction of a universal AI assistant capable of visual interaction through smart glasses. Google also claims that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
Wedbush analyst Dan Ives took a more cautious stance on the potential of AI Overviews compared to Post and Bansal, commenting that while it might contribute positively to Search monetization eventually, it remains to be seen. Ives noted that AI is already benefiting Google Cloud and, like many analysts on Wall Street, anticipates a 27% growth in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similarly positive outlook, recently identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing optimism about the progress in generative AI in anticipation of Alphabet’s upcoming earnings release.
However, Raymond James analyst Josh Beck cautioned that although the current AI developments for Google appear favorable, the long-term impact of AI on the company’s sales is still uncertain.