Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent artificial intelligence initiatives will enhance the company’s performance in its upcoming second-quarter earnings report, scheduled for release after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Alphabet, Google’s parent company, citing the positive impact of integrating its Gemini AI into Google Cloud and the introduction of AI Overviews within Google Search on sales figures. They expressed optimism about the growing AI integration across Google’s platform, believing AI Overviews will stimulate increased user engagement in the core search business, despite earlier complications during its rollout that drew humor online due to inaccuracies. The analysts also adjusted their price target for Google shares from $200 to $206.
In April, Google reported an impressive 60% increase in profits for the first quarter, which was partly attributed to its AI advancements. This surge contributed to a rise in the company’s stock price, elevating its market capitalization beyond the $2 trillion threshold, joining tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed months of new AI product launches as part of Google’s Gemini initiative, including a future AI that can see and communicate through smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush offered a more measured view on AI Overviews, suggesting they could potentially help monetize Google Search over time. He also noted that AI is already contributing to growth in Google Cloud, anticipating a 27% increase in Cloud revenue from the previous year.
Doug Anmuth of J.P. Morgan shared a similarly positive perspective, listing Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, and expressing encouragement regarding the advancements in generative AI ahead of the earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current narrative regarding AI’s impact on Google is favorable, the long-term effectiveness of AI in sustaining sales growth remains uncertain.