Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s upcoming second-quarter earnings report will benefit significantly from the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have revised their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key factors for driving sales growth. They expressed confidence that broader implementation of AI overviews will enhance user activity in the core Search engine, despite initial challenges during the rollout that prompted online ridicule due to inaccuracies. Consequently, they have increased their stock price target for Google from $200 to $206.
In the first quarter, Google reported a staggering 60% increase in profits, largely attributed to its AI developments, which consequently boosted its stock price and market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed a series of new AI product launches, particularly those showcased at the Google I/O developer conference, including a next-generation universal AI assistant designed to integrate with user smart glasses. The company asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush has a more cautious view on AI Overviews compared to Post and Bansal, he acknowledged that it could eventually support Search monetization. He also noted that AI is already positively impacting Google Cloud, with expectations of a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth reinforced the positive outlook on Google as one of their top tech stock picks, alongside Uber and Amazon, highlighting the encouraging developments in generative AI ahead of the earnings report.
However, Josh Beck from Raymond James cautioned that the current favorable narrative surrounding Google’s AI may not necessarily translate into sustained long-term sales growth.