Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the successful integration of the Gemini AI platform into Google Cloud and enhanced AI features in Google Search as catalysts for increased sales.
“We remain optimistic about the expanding use of AI across Google’s services and believe that a wider implementation of AI features will increase engagement in Google’s core Search operations,” they commented in a research note last week. This optimism persists despite some initial challenges faced by AI features, which garnered internet mockery for errors. Consequently, Post and Bansal have upped their price target for Google’s stock from $200 to $206.
In its April report, Google recorded a 60% surge in profits for the first quarter, driven in part by AI innovations. This financial success resulted in a significant stock price increase, elevating the company’s market value beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s robust performance in Q1 followed its release of numerous AI products in recent months, particularly its Gemini AI offerings. The latest announcements at the Google I/O developer conference included a futuristic AI assistant capable of interacting via smart glasses, with Google stating that the new Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed more caution regarding the direct impact of AI features on Search monetization, he acknowledged their potential to provide a boost over time. Ives noted that AI has already been beneficial for Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, consistent with sentiments from other market analysts.
J.P. Morgan’s Doug Anmuth also shared a positive outlook, identifying Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressing optimism about advancements in generative AI prior to Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that while the current perceptions of Google’s AI strategy are favorable, the long-term impact on sales remains uncertain.