Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s strategic moves in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is expected to release its earnings report after the market closes on Tuesday.
Both Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google. They emphasize that the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search will contribute positively to sales.
In a recent research note, they expressed optimism about the growing applications of AI within Google’s ecosystem, suggesting that a wider implementation of AI Overviews could lead to increased activity in the core Search business. This forecast comes despite some initial setbacks with AI Overviews, which faced criticism for producing inaccuracies. As a result, Post and Bansal have adjusted their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits during the first quarter, largely attributed to its AI developments. This significant growth pushed the company’s market capitalization beyond the $2 trillion threshold, placing it alongside tech giants such as Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of new AI product launches under the Gemini AI umbrella, showcased during the Google I/O developer conference. One of the highlights was the introduction of a universal AI assistant designed to interact through smart glasses. Google claims that the latest version of its Gemini AI operates 20% faster than the latest ChatGPT model.
Dan Ives from Wedbush is more cautious regarding the AI Overviews, suggesting they might gradually enhance monetization for Search. However, he acknowledged that AI is already benefiting Google Cloud and anticipates a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan expressed a similar optimistic view, naming Google among the firm’s top tech stock picks—alongside Uber and Amazon—while highlighting the promising advancements in Generative AI ahead of Alphabet’s upcoming earnings report.
Raymond James analyst Josh Beck noted that while the current perception of AI’s impact on Google is favorable, it remains uncertain whether AI will sustainably drive sales growth in the long run.