Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings in the upcoming second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market close.
Both Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, attributing the potential boost to the integration of the Gemini AI platform into Google Cloud and the new AI Overviews feature in Google Search. They expressed optimism about the growing incorporation of AI across Google’s services, suggesting that the wider application of AI Overviews will likely stimulate more activity within the core Search sector.
Despite some initial challenges—where the AI Overviews feature faced criticism for inaccuracies—Post and Bansal raised their price target for Google stock from $200 to $206.
In the first quarter of this year, Google reported a remarkable 60% profit increase, largely driven by its AI initiatives, leading to a surge in its stock price and pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust performance was propelled by its Gemini AI updates, unveiled during the Google I/O developer conference. This includes the introduction of a futuristic universal AI assistant capable of visual and verbal interaction through smart glasses. Google claims its Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the AI Overviews feature, he acknowledged its potential as a future asset for Search monetization. He also noted that AI is already having a positive impact on Google Cloud, with analysts anticipating a 27% revenue increase in that segment year-over-year.
J.P. Morgan’s Doug Anmuth added to the positive outlook, naming Google as one of his firm’s top tech stocks alongside Uber and Amazon, emphasizing the encouraging developments in generative AI before Alphabet’s earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that although the current AI discourse surrounding Google is optimistic, it remains uncertain whether these advancements will significantly bolster sales over the long term.