Google’s advancements in artificial intelligence are anticipated to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is scheduled to disclose its earnings after the market closes on Tuesday.
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Analysts from Bank of America, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google, attributing the expected growth to the integration of the Gemini AI system into Google Cloud and the implementation of AI Overviews in Google Search. They expressed confidence in Google’s expanding AI capabilities, which they believe will enhance activity in the core Search business, despite earlier issues during the rollout of AI Overviews that generated some online ridicule due to inaccuracies. Post and Bansal have also raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely driven by its AI initiatives. This financial success led to a significant rise in its stock price and elevated the company’s market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed the release of several new AI products as part of Google’s Gemini initiative. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through smart glasses, claiming that their new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a less optimistic outlook on AI Overviews compared to Post and Bansal, he acknowledged that it could eventually aid in monetizing Search. Additionally, he noted the positive impact of AI on Google Cloud, anticipating a 27% growth in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan also shared a positive outlook, naming Google as one of the investment firm’s top tech stocks, alongside Uber and Amazon, and highlighting progress in generative AI ahead of Alphabet’s upcoming earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the narrative surrounding Google’s use of AI is currently favorable, its long-term effects on sales remain uncertain.