Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, will release its earnings report on Tuesday afternoon.
Analysts at Bank of America and Wedbush have increased their revenue forecasts for Google, suggesting that the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search could significantly boost sales. They expressed optimism about the expanding AI capabilities across Google’s platforms, noting that a wider deployment of AI Overviews is likely to increase user engagement in the core Search business, despite initial hiccups during its rollout which led to some online ridicule for inaccuracies. As a result, they raised their stock price target for Google from $200 to $206.
In its first quarter report in April, Google experienced a remarkable 60% profit increase, aided by its AI technologies, which caused its stock price to surge and its market capitalization to surpass $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed a series of new AI product launches as part of its Gemini AI initiative. Recent highlights from its Google I/O developer conference included a futuristic AI assistant capable of visual and verbal interaction through smart glasses. Google boasts that its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the potential of AI Overviews, he acknowledged that this feature could eventually enhance Search monetization. He also noted that AI is already contributing positively to Google Cloud revenue, predicting a 27% increase compared to the previous year, in line with other Wall Street analysts’ expectations.
J.P. Morgan’s Doug Anmuth shared a positive outlook, ranking Google among his firm’s top tech stock picks, alongside Uber and Amazon, and mentioning his team’s optimism about generative AI advancements ahead of Alphabet’s quarterly earnings release.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable narrative surrounding AI’s impact on Google, the long-term effects on sales growth remain uncertain.