Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have increased their revenue forecasts for Google, highlighting the positive impact of the company’s integration of its Gemini AI technology into Google Cloud and the introduction of AI Overviews in Google Search. They expressed confidence in the potential for these AI enhancements to spur additional activity in Google’s core Search business, despite some early challenges during the rollout of AI Overviews, which faced criticism for generating errors. As a result, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, attributed in part to its AI initiatives. This led to a surge in the company’s stock price, elevating its market capitalization to over $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Following a series of innovative AI product releases linked to its Gemini offerings, Google unveiled significant advancements at its recent developer conference, Google I/O, including a futuristic universal AI assistant capable of interacting through a user’s smart glasses. The company claims that its latest Gemini AI technology outperforms the newest ChatGPT by 20%.
Dan Ives from Wedbush was slightly more cautious regarding the potential of AI Overviews compared to Post and Bansal, noting that it “may become a tailwind for Search monetization over time.” He also acknowledged that AI is already contributing positively to Google Cloud, projecting a 27% revenue growth in that sector compared to the previous year.
Doug Anmuth from J.P. Morgan also expressed optimism, identifying Google as one of his firm’s top technology stock picks, alongside Uber and Amazon. He conveyed encouragement regarding the progress of generative AI leading up to Alphabet’s second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative around AI for Google seems positive, its long-term effects on sales remain uncertain.