Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to release its earnings report on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and improvements to AI Overviews in Google Search as significant contributors to sales growth. In their research note, they expressed optimism about the ongoing AI developments throughout Google’s ecosystem, predicting that a wider implementation of AI overviews would lead to increased user engagement in the Search segment.
Despite some initial challenges with AI Overviews, which drew criticism and humor online due to inaccuracies, the analysts have 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, largely attributed to its AI advancements. This financial success propelled its stock price and lifted the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive financial results were bolstered by the rollout of various AI products in conjunction with Google’s Gemini offerings. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through smart glasses, claiming that their latest Gemini AI operates 20% faster than the current iteration of ChatGPT.
While Wedbush analyst Dan Ives expressed some reservations about the potential of AI Overviews, he acknowledged that they might aid Search monetization in the future and emphasized the positive influence AI is already having on Google Cloud. According to Ives, Google is expected to report a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook, naming Google among his firm’s top tech stock picks, alongside Uber and Amazon, and stating that his team is optimistic about the progress in Generative AI leading up to Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current AI narrative surrounding Google appears favorable, the long-term impact of AI on the company’s sales remains uncertain.