Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal revised their revenue forecasts for Google upward, attributing this to the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search, which they believe will drive sales.
In a research note, they expressed ongoing confidence in the growing presence of AI within Google’s ecosystem, suggesting that a wider rollout of AI Overviews could lead to increased activity in its core Search business. This optimism persists despite initial challenges during the launch of AI Overviews, which were met with online ridicule for inaccuracies. They have updated their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly aided by its AI initiatives. This surge in profits led to a jump in the company’s stock price, elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The robust first-quarter results came on the heels of numerous new AI product launches, part of its Gemini AI suite. At its recent Google I/O developer conference, the company unveiled an ambitious AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI model is 20% quicker than the latest version of ChatGPT.
Although Wedbush analyst Dan Ives was more cautious about the AI Overviews compared to his colleagues, he noted that they could eventually support revenue growth for Search. He also highlighted the positive impact of AI on Google Cloud revenue, predicting a 27% year-over-year increase.
Doug Anmuth from J.P. Morgan shared a similarly optimistic view, including Google among the firm’s top technology stock picks alongside Uber and Amazon. He noted his team’s encouragement regarding the progress in generative AI as the company approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI developments look promising for Google, the long-term impact on sales remains uncertain.