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. Google’s parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Following Nvidia’s earnings report, major technology companies are accelerating their investments in AI, according to a strategist. Analysts from Bank of America, including Justin Post and Nitin Bansal, have increased their revenue forecasts for Google. They believe that integrating Gemini into Google Cloud and enhancing AI Overviews in Google Search will drive sales growth.
In a research note released last week, they expressed optimism about the expanding AI applications within Google’s ecosystem, suggesting that a broader implementation of AI Overviews could lead to increased activity in the core Search business. This perspective persists despite initial challenges with the AI Overviews, which were initially criticized online for errors and inaccuracies. They have raised their price target for Google stock from $200 to $206.
In April, Google reported an impressive 60% profit increase in the first quarter, partially attributed to AI. This surge resulted in a spike in the company’s stock price, pushing its market capitalization over the $2 trillion mark, alongside peers like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches as part of its Gemini offerings, including a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives is less optimistic about AI Overviews compared to Post and Bansal, he noted that it could eventually positively impact Search monetization. He also remarked that AI is already contributing to growth in Google Cloud, anticipating a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a similar optimistic outlook, naming Google among its top technology stock picks, alongside Uber and Amazon, highlighting the promising developments in generative AI as Alphabet’s second-quarter earnings report approaches.
However, Raymond James analyst Josh Beck cautioned that although the current AI narrative surrounding Google is positive, the long-term impact of AI on the company’s sales remains uncertain.