Analysts at Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will lead to a positive outcome for its second-quarter earnings. Alphabet, the parent company of Google, is scheduled to release its earnings report after the market closes on Tuesday.
Nvidia is currently facing one of its most volatile weeks, as highlighted by various analysts. Both Bank of America and Wedbush have revised their revenue forecasts for Google upward. Bank of America analysts Justin Post and Nitin Bansal attribute the expected sales boost to the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search.
In their research note from last week, the analysts expressed optimism regarding the increasing use of AI within Google’s ecosystem, predicting that a wider implementation of AI overviews will elevate activity in the core Search business. This optimism remains despite some initial challenges with the AI overview tool, which has faced criticism for producing errors. Consequently, the analysts have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely driven by AI advancements. This surge in profitability led to a significant increase in the company’s stock price, elevating its market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter performance was supported by numerous new artificial intelligence products launched under the Gemini AI branding. Recent announcements at the Google I/O developer conference featured futuristic AI assistants capable of interacting through smart glasses. Google claims its latest Gemini AI iteration is 20% faster than the current version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding the potential of AI Overviews, suggesting it might gradually benefit Search monetization in the long run. Meanwhile, he noted that AI is already enhancing Google Cloud’s performance, with analysts expecting a 27% year-over-year revenue increase in that sector.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, recently naming Google alongside Uber and Amazon as one of their top tech stock picks, expressing positive expectations for the company’s generative AI developments ahead of the earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is promising, the long-term impact of AI on the company’s sales remains uncertain.