Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence initiatives will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the positive impacts of integrating Gemini into Google Cloud and AI Overviews into Google Search. They expressed optimism about the growing AI integrations within Google’s ecosystem, emphasizing that a wider rollout of AI overviews is likely to stimulate increased activity in the core Search business. Despite early challenges in the rollout of AI overviews, which faced criticism for producing errors, the analysts raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, largely attributed to its AI developments, resulting in a significant rise in its stock price and elevating its market capitalization to over $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed its series of AI product releases, particularly its Gemini AI lineup. At the recent Google I/O developer conference, the company introduced an advanced AI assistant designed to interact through users’ smart glasses, claiming a 20% speed advantage over the latest version of ChatGPT.
While Wedbush analyst Dan Ives displayed some caution regarding the immediate impact of AI Overviews, he acknowledged their potential to benefit Search monetization in the long run. He asserted that AI is already having a positive effect on Google Cloud, anticipating a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared a positive outlook on Google, highlighting it as one of the firm’s top tech stock picks, alongside Uber and Amazon, and expressing encouragement regarding advancements in generative AI before Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that the long-term effects of AI on Google’s sales remain uncertain, despite the current favorable narrative.