Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, the parent company of Google, is expected to announce its earnings report following the market close on Tuesday.
Bank of America analysts, including Justin Post and Nitin Bansal, have improved their revenue forecasts for Google, highlighting the impact of integrating Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism about the ongoing AI integrations in Google’s ecosystem, predicting a broader implementation of AI overviews will boost engagement in the core Search business. Despite minor setbacks during the initial rollout of AI overviews, which faced mockery for inaccuracies, Post and Bansal raised 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, partially attributed to AI advancements. This surge led to a dramatic rise in stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following a series of new AI product launches related to its Gemini AI offerings, Google’s positive first-quarter results were showcased at the Google I/O developer conference. One significant announcement was a universal AI assistant capable of interacting through a user’s smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the potential of AI Overviews compared to Post and Bansal, he indicated it could benefit Search monetization in the long run. He also noted that AI is already having a positive impact on Google Cloud, projecting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook, identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He expressed enthusiasm for the progress in Generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, the long-term impact of AI on the company’s sales remains uncertain.