Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will positively influence its earnings for the second quarter. The parent company, Alphabet, is expected to release its earnings report on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, suggesting that the integration of the Gemini AI into Google Cloud and new AI Overviews in Google Search could enhance sales. They noted in a recent research report, “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 optimism persists despite some initial challenges with the rollout of AI overviews, which faced criticism for producing errors. Post and Bansal have also raised 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, partially attributed to its AI initiatives, which drove the stock price up and increased the company’s market valuation to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results followed a series of new AI product launches tied to Google’s Gemini AI offerings. At the recent Google I/O developer conference, the company showcased a futuristic AI assistant capable of interacting through users’ smart glasses and claimed that its latest Gemini AI is 20% faster than the most current version of ChatGPT.
Despite the enthusiasm, Wedbush’s Dan Ives expressed a more cautious view regarding the AI Overviews. However, he acknowledged that they could serve as a long-term benefit for Search monetization. Ives also highlighted that AI is already contributing to the growth of Google Cloud, with an expected 27% increase in Cloud revenue compared to last year.
Echoing this positive outlook, J.P. Morgan’s Doug Anmuth identified Google as one of the leading tech investments, alongside Uber and Amazon, citing encouragement from the progress in generative AI leading up to Alphabet’s second-quarter earnings announcement.
Meanwhile, analyst Josh Beck from Raymond James cautioned that while the current sentiment surrounding Google’s AI is positive, the long-term impact of AI on the company’s sales remains uncertain.