Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, attributing expected growth to the company’s advancements in artificial intelligence. Alphabet, the parent company of Google, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upwards. They believe that the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search will contribute to increased sales.
In their recent research note, they expressed confidence in the company’s AI advancements, predicting that a broader deployment of AI overviews will enhance user engagement in the core Search segment. This comes despite some early challenges with AI overviews, which faced public scrutiny due to errors and inaccuracies. They have raised their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, driven in part by its AI initiatives. Consequently, the company’s stock surged, elevating its market capitalization above $2 trillion, thereby joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust performance in the first quarter followed a series of new AI product launches, including features introduced at the Google I/O developer conference, where the company showcased a future universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI operates at a speed 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives has a more cautious view on AI Overviews compared to Post and Bansal, he noted that it could eventually benefit Search monetization. He also stated that AI is already enhancing Google Cloud services, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared a favorable outlook, listing Google as one of the firm’s top tech stock picks alongside Uber and Amazon, citing promising developments in Generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that the current positive narrative surrounding Google’s AI capabilities does not guarantee long-term sales growth from these advancements.