Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday afternoon.
Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that the integration of Gemini into Google Cloud and AI overviews in Google Search will significantly drive sales.
They expressed optimism about the growing integration of AI within Google’s ecosystem, suggesting that a wider rollout of AI overviews could lead to increased engagement in the core Search business, despite some initial challenges during the rollout that prompted internet criticism for errors. As a result, they 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 advancements. This strong performance resulted in a surge in the company’s stock price, pushing Alphabet’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The impressive first-quarter results came on the heels of numerous new AI product launches, including innovations showcased at the Google I/O developer conference, where the company introduced a future AI assistant capable of interacting through smart glasses. Google claims its Gemini AI operates 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush is somewhat more cautious regarding AI Overviews than Post and Bansal, he noted that these developments could enhance Search monetization in the long run. He also emphasized that AI is already positively impacting Google Cloud, projecting a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, naming Google as one of the firm’s top tech stock picks, along with Uber and Amazon, and expressing enthusiasm for the progress in generative AI ahead of Alphabet’s earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current AI narrative for Google appears favorable, it remains uncertain whether AI can sustainably drive long-term sales growth for the company.