Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings report on Tuesday.
Bank of America and Wedbush have both revised their revenue forecasts for Google, highlighting the positive impact of integrating Gemini into Google Cloud and incorporating AI Overviews into Google Search. Analysts Justin Post and Nitin Bansal stated that they remain optimistic about the ongoing AI developments across Google’s platform, believing that the expanded use of AI Overviews will increase user engagement in the core Search business. They adjusted their price target for Google’s stock from $200 to $206, despite some initial challenges with the AI Overviews feature, which faced criticism online for producing errors.
In its first-quarter report in April, Google experienced a remarkable 60% profit increase, a boost attributed in part to AI innovations. This surge helped raise its stock price, elevating the company’s market valuation beyond the $2 trillion threshold, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches, particularly its Gemini offerings. At the recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its latest version of Gemini AI operates 20% faster than the latest ChatGPT model.
While Wedbush’s Dan Ives expressed a more cautious view on the potential of AI Overviews compared to Post and Bansal, he noted it could eventually benefit search monetization. He also pointed to the ongoing positive impact of AI on Google Cloud, projecting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared a similarly optimistic outlook, recently naming Google as one of its top technology stock picks alongside Uber and Amazon, expressing confidence in the advancements in generative AI prior to Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment around Google’s AI capabilities remains optimistic, the long-term impact of AI on sales growth is yet to be determined.