Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings in the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google, crediting the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search for anticipated sales growth. In a recent research note, they expressed optimism about the expanding AI functionalities across Google’s platforms, believing that a wider deployment of AI overviews will significantly increase user engagement in the core Search business. This comes despite some initial setbacks during the rollout of AI overviews, which drew criticism online for its errors and inaccuracies. They have also raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit surge in the first quarter, largely attributed to AI innovations, which subsequently caused its stock price to climb and its market capitalization to exceed $2 trillion, placing it among the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter figures followed months of introducing new AI products, particularly under the Gemini AI umbrella. Noteworthy announcements from the Google I/O developer conference included a revolutionary universal AI assistant capable of interacting through users’ smart glasses. Google claims that the latest iteration of its Gemini AI functions at a speed that is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives maintained a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that it could eventually support revenue growth from Search. He also acknowledged that AI is already benefiting Google Cloud, anticipating a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a positive view, listing Google as one of the firm’s preferred tech stocks alongside Uber and Amazon, and expressing enthusiasm about the progress in generative AI as Alphabet approaches its second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that, although the current narrative surrounding AI at Google is optimistic, the long-term impact on sales remains uncertain.