Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its financial performance in the upcoming second-quarter earnings report. Alphabet, Google’s parent company, is set to release its earnings results on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, attributing the increase to the integration of Gemini into Google Cloud and the AI Overview features in Google Search. They believe these enhancements will generate additional sales. In their recent report, they noted, “We remain positive on 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.” Despite some initial challenges with the AI overviews, which faced criticism for inaccuracies, Post and Bansal have 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, primarily due to its AI innovations. This performance led to a surge in the company’s stock price, elevating its market capitalization to over $2 trillion, placing it in the company of tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed numerous launches of new AI products, particularly through its Gemini AI range. At the recent Google I/O developer conference, the company unveiled an advanced universal AI assistant, capable of interacting through smart glasses. Google asserts that its latest Gemini AI platform is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews but acknowledged their potential to enhance Search monetization in the future. He noted that AI is already positively impacting Google Cloud, with analysts, including himself, expecting a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan also shared an optimistic view of Google, classifying it as one of their top tech stock picks alongside Uber and Amazon, and highlighting their enthusiasm about the progress in generative AI ahead of Alphabet’s earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative around AI for Google is optimistic, the long-term effects on sales remain uncertain.