Analysts from Wedbush, J.P. Morgan, and Bank of America forecast that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. The parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Following an increased revenue outlook for Google, Bank of America’s analysts, Justin Post and Nitin Bansal, suggested that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will contribute to higher sales. They expressed optimism about the potential of AI integrations across Google’s platforms, anticipating that a more extensive rollout of AI overviews would stimulate greater activity in the core Search business. They adjusted their price target for Google’s stock from $200 to $206, despite initial challenges with the AI overviews, which had faced criticism online for producing errors.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives. This earnings surge led to a rise in stock prices, elevating the company’s market capitalization above $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s robust first-quarter performance came after a series of releases within its Gemini AI lineup, showcased during the recent Google I/O developer conference. This included developments such as a universal AI assistant designed to operate through users’ smart glasses, with Google claiming that its latest AI is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush was more cautious regarding the impact of AI Overviews than his counterparts but acknowledged that it could aid Search monetization over time. He also indicated that AI is significantly benefiting Google Cloud, with expectations of a 27% revenue increase in that sector compared to the previous year.
Doug Anmuth from J.P. Morgan shared a favorable outlook, listing Google among the firm’s top technology stock picks—alongside Uber and Amazon—and expressed optimism about the progress in Generative AI leading up to Alphabet’s earnings report.
Lastly, analyst Josh Beck from Raymond James cautioned that while the current portrayal of Google’s AI efforts is positive, it remains uncertain whether these innovations will sustain long-term sales growth for the company.