Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in AI will positively impact its second-quarter earnings, as the company prepares to announce its financial results after market close on Tuesday.
The analysts have adjusted their revenue forecasts for Google, with Bank of America’s Justin Post and Nitin Bansal highlighting the benefits of integrating the Gemini AI technology into Google Cloud and the introduction of AI Overviews in Google Search, which they believe will enhance sales.
In a research note, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite initial challenges with the AI overview tool, which faced criticism for producing errors and inaccuracies. They have raised their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This impressive performance led to a significant rise in the company’s stock price, elevating its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This robust first-quarter showing followed months of new AI product launches, including developments showcased at Google I/O, where the company unveiled a universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he noted in a Monday report that this feature could eventually bolster Search monetization. He also affirmed that AI is already enhancing Google Cloud, projecting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared the optimistic outlook and identified Google as one of the top tech stocks, alongside Uber and Amazon, praising the advancements in generative AI ahead of the company’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI efforts appears favorable, the long-term impact on sales remains uncertain.