Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing the company’s expected sales boost to the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism about the potential for AI integrations to enhance activity in Google’s core Search business, despite some initial challenges with the AI Overviews tool. As a result, they increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, which was partly driven by its AI initiatives. This strong performance led to a surge in the company’s stock price, surpassing the $2 trillion market capitalization and placing Google alongside industry giants like Apple, Microsoft, and Nvidia.
The company’s successful first-quarter results followed the launch of numerous AI products as part of the Gemini AI offerings. During its developer conference, Google I/O, it unveiled features including a universal AI assistant capable of processing visual and auditory input through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush analyst Dan Ives expressed a slightly more cautious stance on the immediate impact of AI Overviews, he noted that it could contribute positively to Search monetization in the long run. Ives also emphasized that AI is already enhancing Google Cloud, and he, alongside other analysts, anticipates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared similar optimistic views, identifying Google as one of the investment firm’s top tech stocks, alongside Uber and Amazon, as they prepare for Alphabet’s second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is encouraging, the long-term effects on sales remain uncertain.