Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Alphabet Inc., Google’s parent company, as it approaches the release of its second-quarter earnings report on Tuesday. They believe the company’s ventures into artificial intelligence (AI) will significantly enhance its financial performance.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google. They attribute this boost to the integration of the Gemini AI into Google Cloud and enhancements in Google Search’s AI capabilities, which they believe will lead to increased user engagement and activity within the core Search business. Despite initial challenges with the rollout of AI features, which were met with some humor online due to early inaccuracies, these analysts remain positive and have raised their stock price target for Google from $200 to $206.
In the previous quarter, Google reported a remarkable 60% rise in profits, largely attributed to its AI innovations. This surge in earnings led to a significant increase in its stock price, allowing Google to achieve a market capitalization exceeding $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The company’s recent initiatives include the Gemini AI series, launched during its Google I/O developer conference, which promises enhanced functionalities, including a universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the most current version of ChatGPT.
Although Wedbush’s Dan Ives expressed a more cautious outlook regarding AI Overviews, he acknowledged that it could eventually support Search monetization. Ives is confident in Google Cloud’s growth, predicting a 27% revenue increase compared to the previous year. In a similar vein, J.P. Morgan’s Doug Anmuth identified Google as one of their top tech stock picks, citing the company’s advancements in generative AI.
However, Raymond James analyst Josh Beck cautioned that while the short-term outlook for Google appears promising due to its AI developments, it remains uncertain if these innovations will result in sustained long-term sales growth.
In summary, Google’s ongoing investments in AI are expected to positively influence its upcoming earnings report, reflecting both immediate benefits and potential for future growth in the competitive tech landscape. The continuous evolution in AI could pave the way for innovative user experiences and significant revenue opportunities for the company.