Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to disclose its earnings on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, believing that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will stimulate sales growth. They expressed optimism in a recent research report, stating that the wider application of AI overviews is likely to increase engagement in Google’s core Search business, despite earlier issues with the rollout of these features, which led to online ridicule due to their inaccuracies. They have adjusted their price target 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 AI innovations. This report triggered a rise in the company’s stock price, enabling it to surpass the $2 trillion market capitalization, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches as part of its Gemini offerings. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interfacing through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush is less optimistic about AI Overviews than his colleagues but noted that it could become beneficial for Search monetization in the long run. He also pointed out that AI is already contributing positively to Google Cloud, with expectations of a 27% revenue increase compared to last year.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook, naming Google as one of its leading tech stock picks, alongside Uber and Amazon. He mentioned being encouraged by the progress of generative AI leading up to Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment around AI is positive, the long-term impact of AI on Google’s sales remains uncertain.