Analysts from Wedbush, J.P. Morgan, and Bank of America expect Google’s AI initiatives to enhance its second-quarter earnings report. Alphabet, Google’s parent company, is scheduled to disclose its earnings on Tuesday after market close.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing potential sales growth to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search. They expressed optimism regarding AI features across Google’s platform, suggesting that enhanced AI overviews could lead to increased engagement in the primary Search division. Despite some early criticisms of AI overviews due to errors, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely driven by its AI advancements. This surge in earnings led to a rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter came after months of launching new AI products as part of the Gemini initiative. During the Google I/O developer conference, the company unveiled a next-generation AI assistant capable of interacting via smart glasses, claiming the latest Gemini AI operates 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives was more reserved regarding AI Overviews’ immediate impact compared to Post and Bansal, he noted that they could support Search monetization in the long run. He also mentioned that AI is already providing a boost to Google Cloud, with a projected 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, designating Google as one of the firm’s key tech stock picks along with Uber and Amazon, and expressed optimism about the advancements in generative AI ahead of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that despite the current favorable AI narrative for Google, the long-term impact of AI on the company’s sales remains uncertain.