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. Google’s parent company, Alphabet, is expected to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and new AI Overviews in Google Search will significantly boost sales.
In a research note released last week, they stated their optimism about the growing integration of AI across Google’s services, arguing that the expanded use of AI Overviews would enhance user engagement with the core Search business. This comes despite some setbacks during the initial deployment of AI Overviews, which faced criticism for inaccuracies. The analysts also 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, driven partly by its AI initiatives. This surge in profits led to a rise in the company’s stock price, helping it achieve a market valuation exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed numerous releases of new AI products related to its Gemini AI offerings. At its recent developer conference, Google I/O, the company unveiled a next-generation AI assistant capable of interacting through smart glasses. Google boasts that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
Dan Ives from Wedbush expressed a cautious view on AI Overviews but acknowledged in a research note that it could eventually support Search monetization over time. He noted that AI is already having a positive effect on Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, naming Google as one of the investment firm’s top tech stock recommendations, alongside Uber and Amazon. He expressed confidence in the progress of generative AI leading up to Alphabet’s second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI is encouraging, it remains uncertain whether AI will consistently drive long-term sales growth for the company.