Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting a positive impact on Google’s second-quarter earnings, attributed to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush analysts have upgraded their revenue forecasts for Google. Justin Post and Nitin Bansal from Bank of America believe that the integration of Google’s Gemini into its Cloud services and the introduction of AI Overviews in Google Search will enhance sales.
“We remain optimistic about the growing AI integrations within Google’s ecosystem and expect that a wider implementation of AI overviews will drive increased activity in the core Search business,” the analysts noted in a research statement. This optimism persists despite some glitches during the initial rollout of AI overviews, which faced criticism online for inaccuracies. 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 supported by AI initiatives, which led to a significant rise in its stock price and elevated the company’s market cap to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance was bolstered by numerous AI product launches, particularly its Gemini AI offerings. At the Google I/O developer conference, the company unveiled a cutting-edge universal AI assistant designed to function with smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the newest iteration of ChatGPT.
While Dan Ives from Wedbush expressed some reservations about the potential of AI Overviews, he acknowledged that they could positively influence Search monetization in the long run. He also noted that AI is currently benefiting Google Cloud, projecting a 27% year-over-year revenue growth for the Cloud segment.
Doug Anmuth from J.P. Morgan shared similar sentiments, listing Google among the firm’s top tech stocks alongside Uber and Amazon, citing optimism regarding advancements in Generative AI in anticipation of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding Google’s AI is optimistic, the long-term effects on sales driven by AI remain uncertain.