Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are gearing up to enhance the company’s second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings this Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upward, anticipating that the integration of Gemini into Google Cloud alongside AI Overviews in Google Search will positively impact sales. They expressed optimism about the ongoing AI developments across Google’s ecosystem, suggesting that an expanded release of AI overviews could lead to increased engagement in the core Search business. This perspective comes despite some early challenges with the AI overviews, which faced criticism online for yielding inaccuracies. As a result, Post and Bansal have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits in the first quarter, partially attributed to its AI initiatives, which led to a significant rise in stock prices and pushed the company’s market capitalization above $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
This impressive first-quarter performance followed a series of new AI product launches that were part of Google’s Gemini AI portfolio. Noteworthy recent announcements during the Google I/O developer conference included a futuristic universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI version is 20% faster than the newest iteration of ChatGPT.
Wedbush analyst Dan Ives presented a more cautious view on AI Overviews, suggesting they could contribute to Search monetization in the long run. He also noted that AI is significantly enhancing Google Cloud performance, with expectations for a 27% increase in Cloud revenue from the previous year.
Similarly, Doug Anmuth of J.P. Morgan expressed positive sentiments about Google’s potential, labeling it as one of the firm’s top tech stocks, alongside Uber and Amazon. He highlighted his team’s optimism regarding the progress in generative AI before Alphabet’s earnings report.
On the other hand, Raymond James analyst Josh Beck cautioned that although Google’s current AI developments appear promising, it remains uncertain whether AI will lead to long-term sales growth for the company.