Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is expected to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and the AI Overviews in Google Search as key drivers of sales growth. In a recent research note, they expressed optimism about the AI developments within Google, stating that a wider implementation of AI Overviews is likely to enhance activity in the company’s core Search business, despite some issues experienced during the initial rollout.
Google enjoyed a 60% increase in profits during the first quarter, largely attributed to its AI initiatives, which resulted in a significant rise in its stock price and pushed its market capitalization past the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The initial quarter’s success was a result of numerous AI product launches within Google’s Gemini AI framework, with recent innovations showcased at the Google I/O developer conference, including a next-generation universal AI assistant designed to interact through smart glasses. Google also claims its Gemini AI is 20% faster than the latest ChatGPT.
While Wedbush’s analyst Dan Ives expressed more caution regarding the potential of AI Overviews, he acknowledged that it may eventually benefit Search monetization. He also noted the ongoing positive influence of AI on Google Cloud, predicting a 27% year-over-year revenue growth for the Cloud division.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, ranking Google among its top tech stock picks, alongside Uber and Amazon, and highlighting encouraging progress in Generative AI as Alphabet prepares to reveal its second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI appears favorable, the long-term impact of AI on the company’s sales remains uncertain.