Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Google, officially known as Alphabet, is scheduled to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this boost to the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search, which they believe will enhance sales.
They noted in a recent research report, “We remain positive on the 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 is despite the initial challenges faced during the rollout of AI Overviews, which led to some humorous mishaps online. They also 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, significantly aided by its AI initiatives. This strong performance led to a surge in the company’s stock price, elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The impressive first-quarter performance followed numerous launches of new AI products as part of the Gemini AI suite. At its annual developer conference, Google I/O, the company unveiled a future universal AI assistant capable of interacting through smart glasses. Google also claims that its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed more caution regarding AI Overviews compared to Post and Bansal, he mentioned in a Monday report that the tool “may become a tailwind for Search monetization over time.” He also noted that AI is currently enhancing Google Cloud’s performance and anticipates that Google will report a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also shared a similar optimistic outlook, identifying Google as one of the firm’s top tech stock recommendations alongside Uber and Amazon, citing encouragement due to advancements in generative AI as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI trend appears favorable for Google, it remains uncertain whether AI will bolster long-term sales growth.