Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute the expected sales boost to the integration of the Gemini AI system into Google Cloud and the implementation of AI overviews in Google Search.
In a research note released last week, they expressed optimism about the growing integration of AI across Google’s services, believing that an expanded rollout of AI overviews will increase engagement in the company’s core Search business. This is despite some initial challenges, where the AI overviews faced criticism online for inaccuracies. Consequently, 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, partly driven by its AI developments, which led to a surge in its stock price and lifted its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed multiple new AI product launches as part of its Gemini offerings. These included announcements at the Google I/O developer conference, highlighting a universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view regarding the immediate impact of AI Overviews, suggesting they may become beneficial for Search monetization in the long run. However, he indicated that AI has already positively influenced Google Cloud, predicting a 27% year-over-year growth in Cloud revenue.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook and designated Google as one of the firm’s top technology stocks, alongside Uber and Amazon. He noted that his team is encouraged by the progress of Google’s generative AI as they approach Alphabet’s second-quarter earnings announcement.
Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google appears favorable, the long-term effects of AI on the company’s sales remain uncertain.