Google’s prospects for the second quarter appear bright, buoyed by its advances in artificial intelligence, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to announce its earnings following market close on Tuesday.
Analysts from Bank of America and Wedbush have updated their revenue forecasts for Google, with Justin Post and Nitin Bansal highlighting how the integration of AI tools such as Gemini into Google Cloud and robust AI overviews in Google Search are expected to enhance sales.
In a research note released at the end of last week, analysts expressed optimism that the broader implementation of AI overviews will increase user engagement in Google’s Search segment, despite some initial challenges that the tool faced, which led to online mockery due to inaccuracies. They have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% rise in profits for the first quarter, driven in part by its AI innovations. Following this, the company’s stock price surged, pushing its market capitalization to over $2 trillion, joining the ranks of technology giants like Apple, Microsoft, and Nvidia.
This robust first-quarter performance came after several months of launching new AI products within its Gemini portfolio. At its recent developer conference, Google I/O, the company introduced a futuristic universal AI assistant capable of interacting through a user’s smart glasses, claiming that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
Although Wedbush’s Dan Ives expressed some caution regarding the potential of AI Overviews, he noted in a Monday research note that it has the potential to positively impact Search monetization in the long term. He also indicated that AI developments are already providing a boost to Google Cloud, anticipating a 27% year-over-year growth in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, naming Google as one of its top technology stock picks, along with Uber and Amazon, ahead of Alphabet’s upcoming earnings report, praising the company’s progress in generative AI.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is favorable, the potential for AI to drive long-term sales growth remains uncertain.