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. Alphabet, Google’s parent company, is scheduled to release its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, highlighting the positive impact of the integration of Gemini into Google Cloud and AI Overviews in Google Search on sales. In a recent research note, they expressed optimism about AI integrations across Google’s ecosystem and believe that a broader rollout of AI overviews will elevate activity in the core Search business, despite some early challenges that led to some humorous internet responses about the tool’s inaccuracies. They have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% increase in profits for the first quarter, fueled in part by its AI initiatives. This impressive performance led to a surge in the company’s stock price, resulting in a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches, including notable announcements from the Google I/O developer conference. One of these was a futuristic universal AI assistant capable of interacting through smart glasses, with Google asserting that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s analyst Dan Ives expressed more caution regarding the immediate impact of AI Overviews, he noted that they could provide long-term benefits for Search monetization. He also pointed out that AI is already enhancing Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth shared a similar positive outlook, identifying Google as one of the investment firm’s top tech stocks alongside Uber and Amazon. He expressed optimism about the progress in generative AI ahead of Alphabet’s earnings report.
Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding AI for Google is encouraging, the long-term effects on sales remain uncertain.