Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s artificial intelligence advancements will contribute positively to its upcoming second-quarter earnings report, which is scheduled to be released after the market closes on Tuesday.
Following the recent performance variations, Bank of America and Wedbush have adjusted their revenue forecasts upward for Google’s parent company, Alphabet. Analysts Justin Post and Nitin Bansal from Bank of America predict that the company’s integration of its Gemini AI features into Google Cloud and AI Overviews in Google Search will enhance sales.
In a research note released last week, they expressed optimism about the ongoing integration of AI within Google’s services, suggesting that the wider implementation of AI Overviews could lead to increased user engagement in Google’s core search business. This comes despite some early challenges experienced with the AI Overviews feature, which faced criticism for producing errors and inaccuracies. As a result of their positive outlook, the analysts raised their price target for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% surge in profits for the first quarter, largely attributed to its AI initiatives, which propelled its stock price and pushed its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This robust first-quarter performance followed several months of the rollout of new AI products under the Gemini brand. During the Google I/O developer conference, the company unveiled its vision for a universal AI assistant capable of interacting through users’ smart glasses. Google has asserted that its Gemini AI is 20% faster than the latest version of ChatGPT.
Although Wedbush analyst Dan Ives expressed a more cautious stance regarding the potential of AI Overviews compared to his colleagues, he noted that this feature could become a beneficial factor for search monetization in the future. He also highlighted that AI is already making a positive impact on Google Cloud, projecting a 27% revenue increase in that sector year-over-year, a sentiment echoed by several other analysts.
J.P. Morgan’s Doug Anmuth further supported the positive outlook on Google, ranking it among the investment firm’s top technology stocks, together with Uber and Amazon, and stating that his team is optimistic about the progress in generative AI as Alphabet approaches its second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current perception of Google’s AI strategy is favorable, the long-term impact on the company’s sales remains uncertain.