Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Both Bank of America and Wedbush have adjusted their revenue predictions upward for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI program into Google Cloud and the introduction of AI Overviews in Google Search will lead to increased sales.
In a recent research note, they expressed optimism about the growing presence of AI across Google’s platforms, indicating that a wider rollout of AI features would likely boost user activity within the core Search business. This comes despite some initial challenges encountered with the AI Overviews rollout, which drew criticism for producing errors. As a result, Post and Bansal have raised 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 attributed to its AI initiatives. Following this news, the company’s stock experienced a significant rise, elevating its market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This strong quarterly performance was supported by the launch of various new AI products as part of Google’s Gemini offerings. During its recent developer conference, Google I/O, the company unveiled a futuristic universal AI assistant designed to interact through smart glasses. Google claims that its Gemini AI is 20% faster than the latest version of ChatGPT.
Although Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, he noted that it could potentially support future monetization of Search. He believes AI is already positively impacting Google Cloud and forecasts a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, designating Google as one of the firm’s top technology stocks, alongside Uber and Amazon, while expressing enthusiasm for the progress in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment around Google’s AI is favorable, the long-term impact of AI on sales growth remains uncertain.