Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts for Google upward. Analysts Justin Post and Nitin Bansal from Bank of America highlighted that the integration of Gemini into Google Cloud, as well as AI Overviews in the Google Search platform, are expected to significantly increase sales.
They stated in a recent research note that they remain optimistic about the growing AI capabilities within Google’s ecosystem, believing that a wider deployment of AI Overviews will lead to increased activity in the core Search business. This comes despite some challenges during the initial launch phase of AI Overviews, which faced criticism for inaccuracies and errors that became the subject of online humor. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely attributed to its AI initiatives, which in turn caused its stock price to surge and its market capitalization to surpass $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed numerous new AI product launches as part of Google’s Gemini AI suite. Notably, the recent Google I/O developer conference showcased a next-generation universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives of Wedbush expressed a more cautious perspective on AI Overviews compared to Post and Bansal, noting that while it may eventually support Search monetization, the immediate impact is uncertain. However, he acknowledged that AI is already benefiting Google Cloud, and he, like many analysts, anticipates a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan echoed the overall positive outlook, listing Google among the firm’s top technology stock picks, alongside Uber and Amazon. He mentioned being encouraged by the advancements in generative AI as Alphabet approaches its second-quarter earnings report.
On the other hand, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding Google’s AI is favorable, the long-term influence of AI on the company’s sales remains to be seen.