Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence (AI) will positively impact its second-quarter earnings, with Alphabet set to announce its earnings on Tuesday evening.
Following a major upward revision in revenue forecasts, Bank of America’s Justin Post and Nitin Bansal highlighted the integration of Gemini AI into Google Cloud and the introduction of AI Overviews on Google Search as key factors that may enhance sales. Despite some initial hiccups during the deployment of AI Overviews, which faced criticism for inaccuracies, the analysts remain optimistic. They have increased their price target for Google’s stock from $200 to $206, emphasizing the continued promise of Google’s AI innovations.
In its previous quarter, Google reported a staggering 60% increase in profits, largely attributed to its AI initiatives. This surge propelled the company’s market capitalization beyond $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia. Google’s robust first-quarter performance was fueled by multiple AI product launches, particularly from its Gemini suite, which includes ambitious features like a future AI assistant capable of interacting through smart glasses. The latest version of Gemini AI claims to be 20% faster than the latest ChatGPT model.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he noted that these features could contribute positively to Search monetization over the long term. Furthermore, Ives acknowledged that AI innovations are already benefiting Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth expressed a similarly positive viewpoint, citing Google’s progress in generative AI and naming it among his top tech stock recommendations, alongside Uber and Amazon.
However, Raymond James analyst Josh Beck cautioned that the long-term effects of AI on Google’s sales remain uncertain, highlighting the need for sustained performance beyond current projections.
This analysis reflects a cautiously optimistic outlook for Google, indicating that its foray into AI could pave the way for significant revenue growth, especially as innovations continue to evolve. As the company gears up to unveil its financial results, stakeholders are hopeful that the advancements in AI will translate into tangible success, reinforcing Google’s position as a leader in tech innovation.