Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is expected 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, attributing expected growth to the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search. They believe that a wider implementation of AI Overviews will enhance activity in Google’s core Search business, despite initial challenges that saw the feature becoming a target of humor online due to inaccuracies. Following this assessment, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, bolstered by its AI advancements, leading to a surge in its stock price and pushing its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed several releases of new AI products as part of its Gemini AI program. Notably, during the recent Google I/O developer conference, a futuristic AI assistant capable of interacting through smart glasses was introduced. Google asserts that its latest version of Gemini AI is 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he acknowledged that it could contribute positively to Search monetization in the long run. He also noted that AI is currently enhancing Google Cloud’s performance, with expectations of a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook and categorized Google as one of the firm’s top technology investment picks, alongside Uber and Amazon, highlighting his team’s encouragement regarding advancements in generative AI as Alphabet’s second-quarter earnings report approaches.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is promising, the long-term impact of AI on driving sales remains uncertain.