Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings as Alphabet prepares to release its financial results after the market closes on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have raised their revenue forecasts for Google, citing the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search as key factors that could enhance sales growth. They expressed optimism about the ongoing AI developments within Google’s ecosystem and believe that a wider rollout of AI overviews will increase user engagement in the core Search business, despite some initial challenges and criticisms surrounding the early use of the AI tool. As a result, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely attributed to its AI initiatives, which propelled its stock price to over the $2 trillion market cap, joining tech giants like Apple, Microsoft, and Nvidia. This strong performance came after a series of AI product launches, including a new universal AI assistant that can interact through smart glasses, introduced at the Google I/O developer conference. Google claims that its latest Gemini AI is significantly faster than the newest ChatGPT.
While Wedbush analyst Dan Ives is less enthusiastic about the immediate impact of AI Overviews compared to his counterparts, he acknowledged its potential for future Search monetization. He noted that AI is already influencing growth in Google Cloud services and predicted a 27% revenue increase in this sector compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook, ranking Google among his firm’s top tech stock recommendations along with Uber and Amazon. He expressed optimism about the progress of generative AI (GenAI) ahead of the upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that, while the current AI-related narratives surrounding Google appear favorable, it’s still uncertain whether AI will facilitate sustained sales growth for the company in the long run.