Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute an anticipated revenue boost to the integration of Gemini into Google Cloud and AI Overviews in Google Search. In their research note, they expressed optimism about growing AI integrations within Google’s ecosystem, predicting that a wider rollout of AI Overviews will enhance activity in the core Search business. This comes despite some initial issues where AI Overviews faced criticism for producing errors. They have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits in the first quarter, largely attributable to AI developments. This performance led to a significant rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, positioning it alongside tech giants like Apple, Microsoft, and Nvidia.
This positive financial outcome was bolstered by a series of new AI product launches as part of Google’s Gemini AI initiatives. At its recent developer conference, Google I/O, the company introduced a futuristic universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI outperforms the newest version of ChatGPT by being 20% faster.
Although Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged the potential for future benefits in Search monetization. He also noted that AI is already contributing positively to Google Cloud, projecting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared an optimistic outlook, naming Google among the firm’s top tech stocks, alongside Uber and Amazon. He expressed confidence in the advancements in Generative AI as Alphabet approaches its second-quarter earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current momentum surrounding AI is favorable, the long-term impact on Google’s sales remains uncertain.