Analysts from Wedbush, J.P. Morgan, and Bank of America believe Google’s advancements in artificial intelligence will lead to a strong earnings performance for the company in the second quarter. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search as key growth drivers. They stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This optimism persists despite earlier issues with the AI overview tool, which received criticism for inaccuracies. They have also raised their target price for Google shares from $200 to $206.
In its April report, Google announced a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This resulted in a surge in its stock price, elevating its market capitalization beyond the $2 trillion threshold, joining tech giants like Apple, Microsoft, and Nvidia.
The company’s robust earnings performance followed extensive AI product launches within its Gemini AI portfolio. Highlights from the Google I/O developer conference included an advanced AI assistant capable of functioning through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was somewhat cautious about the immediate impact of AI Overviews, he acknowledged potential long-term benefits for Search monetization. He also noted that AI is already positively influencing Google Cloud revenue, estimating a 27% growth from the previous year.
J.P. Morgan analyst Doug Anmuth expressed a similar positive outlook, naming Google among their top technology stock picks alongside Uber and Amazon. He emphasized feeling optimistic about the progress of generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the positive AI narrative currently surrounding Google, it remains uncertain if these AI developments will lead to sustained long-term sales growth.