Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. The parent company, Alphabet, is expected to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as significant factors for boosting sales. They expressed optimism about the company’s ongoing AI integration efforts, believing that the expanded deployment of AI will lead to increased user activity in the core Search business. This positive outlook remains despite initial challenges during the rollout of AI Overviews, which faced criticism for producing errors and inaccuracies. Consequently, they raised their price target for Google’s stock from $200 to $206.
In April, Google experienced a remarkable 60% increase in profits for the first quarter, partly attributed to its AI innovations. This strong performance resulted in a surge in the company’s stock price, propelling its market capitalization past $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s successful first quarter followed a series of new AI product launches associated with its Gemini AI offerings. At the Google I/O developer conference, Google revealed plans for a universal AI assistant capable of interacting through smart glasses, with its latest Gemini AI claimed to be 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives had a more cautious stance on AI Overviews compared to Post and Bansal, he noted that they could eventually support Search monetization. Ives emphasized that AI is already contributing positively to Google Cloud, echoing Wall Street’s consensus of a projected 27% growth in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared similar optimism, recently naming Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He highlighted the encouraging progress in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI buzz around Google is favorable, it remains uncertain whether AI will sustain sales growth for the long term.