Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter as parent company Alphabet prepares to release its financial results on Tuesday.
In one of this year’s significant transactions, Mars, the maker of M&M’s, is set to acquire Kellanova, the producer of Pop-Tarts.
Bank of America’s analysts, Justin Post and Nitin Bansal, have raised their revenue forecasts for Google, attributing potential sales growth to the integration of their AI project, Gemini, into Google Cloud and AI Overviews in Google Search. They express optimism regarding the increasing integration of AI across Google’s services and suggest that expanding the use of AI overviews could stimulate more engagement in the core Search business, despite initial setbacks that led to some public criticism of the AI tool. Consequently, they have adjusted their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits during the first quarter, largely driven by AI contributions. This surge caused the company’s stock prices to rise, elevating its market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed months of new artificial intelligence releases as part of Google’s Gemini platform. Recent announcements at the Google I/O developer conference included a futuristic universal AI assistant capable of interacting through smart glasses. Google asserts that its latest version of Gemini AI is 20% quicker than the latest ChatGPT.
Dan Ives of Wedbush was slightly more cautious regarding the AI Overviews but noted in a recent report that these innovations could boost search revenue over time. He acknowledged that AI is enhancing Google Cloud’s performance and predicts, in line with other analysts, a 27% increase in Cloud revenue compared to last year.
Douglass Anmuth from J.P. Morgan echoed this optimistic view, highlighting Google as one of the firm’s favored tech investments, alongside Uber and Amazon, citing confidence in the progress of generative AI (GenAI) ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current positive narrative surrounding Google’s AI is promising, it remains uncertain whether these advancements will sustainably boost the company’s sales in the long run.