Google’s advancements in artificial intelligence are projected to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is expected to announce its earnings following the market close on Tuesday.
Analysts at Bank of America, Justin Post and Nitin Bansal, have boosted their revenue forecasts for Google, attributing growth to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism in a recent report, stating that the wider implementation of AI features is likely to spur increased activity in the core Search business, despite initial challenges during the rollout when the feature faced criticism for inaccuracies. Consequently, they revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, partially fueled by its AI initiatives. This strong performance resulted in a significant rise in stock prices, elevating the company’s market capitalization beyond the $2 trillion mark, joining tech giants such as Apple, Microsoft, and Nvidia.
The impressive first-quarter results were complemented by ongoing releases of new AI products as part of its Gemini AI suite. Among the highlights revealed at the Google I/O developer conference was an innovative AI assistant designed to interact through smart glasses. Google touts that its latest Gemini AI is 20% quicker than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the potential of AI Overviews, he noted that these features could eventually benefit Search revenue. Ives acknowledged that AI is already delivering positive results for Google Cloud, predicting a 27% year-over-year increase in Cloud revenue, a sentiment shared by several Wall Street analysts.
J.P. Morgan’s Doug Anmuth reiterated the optimistic outlook for Google, naming it among the firm’s top technology stock picks, alongside Uber and Amazon, while highlighting positive developments in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the favorable current AI narrative, the long-term impact on Google’s sales remains uncertain.