Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, as the parent company Alphabet prepares to release its financial report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecast for Google due to the company’s integration of the Gemini AI platform into Google Cloud and the introduction of AI Overviews in Google Search, which they believe will stimulate sales.
In a research note, the analysts expressed optimism about the growth of AI applications across Google’s services, indicating that a wider adoption of AI Overviews could lead to increased engagement in the Search segment. This comes despite initial challenges during the rollout of AI Overviews, which faced criticism for generating errors. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit surge in the first quarter, partly attributed to its AI developments, leading its stock to rise and pushing its market cap beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed a series of AI product launches, including the recent unveiling of a universal AI assistant at the Google I/O developer conference, designed to interact through smart glasses. Google claims its Gemini AI outperforms the latest version of ChatGPT by being 20% faster.
While Dan Ives from Wedbush expressed a slightly less optimistic view on the immediate effectiveness of AI Overviews, he acknowledged that they could eventually support increased monetization in Search. He also noted that Google Cloud is already benefiting from AI advancements, with predictions of a 27% increase in revenue compared to last year.
J.P. Morgan analyst Doug Anmuth highlighted Google’s potential as one of the firm’s top tech investments, alongside Uber and Amazon, citing promising developments in Generative AI ahead of Alphabet’s second-quarter earnings.
However, analyst Josh Beck from Raymond James pointed out that, despite the positive outlook on Google’s AI initiatives, the long-term impact on sales remains uncertain.