Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after market hours on Tuesday.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal of Bank of America believe that the incorporation of Gemini into Google Cloud, along with AI Overviews in Google Search, will positively impact sales. In a recent research note, they expressed optimism regarding the increasing integration of AI across Google’s platforms, suggesting that an expanded rollout of AI overviews could lead to increased user activity in the Search division. This outlook comes despite some initial setbacks during the introduction of AI overviews, which faced criticism for generating errors and misinformation. They have raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a staggering 60% increase in profits for the first quarter, aided by AI enhancements, resulting in a surge in stock price that pushed its market value above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive performance in the first quarter followed a series of new AI product launches as part of its Gemini AI initiatives. At its recent developer conference, Google I/O, it introduced a futuristic universal AI assistant capable of interacting through smart glasses. The company claims that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush offered a more cautious perspective on AI Overviews than his counterparts, mentioning that it might eventually serve as a positive factor for Search monetization. He affirmed that AI is already providing a boost to Google Cloud, projecting a 27% increase in Cloud revenue year-over-year, in line with other Wall Street analysts.
Doug Anmuth from J.P. Morgan shared the optimistic sentiment, naming Google as a top tech stock alongside Uber and Amazon, while expressing his team’s excitement over the progress in Generation Artificial Intelligence (GenAI) ahead of Alphabet’s earnings report for the second quarter.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around AI for Google is favorable, it remains to be seen if AI will drive sustained sales growth for the company in the long run.