Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI initiatives will positively impact its second-quarter earnings. 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 outlook for Google, crediting the integration of Gemini into Google Cloud and AI Overviews in Google Search as key factors likely to enhance sales. They expressed optimism about the expanding AI features within Google’s platform, saying that wider deployment of AI overviews could stimulate increased activity in Google’s core Search business, despite some initial challenges with the rollout that drew internet criticism for inaccuracies. They raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, fueled in part by its AI developments. This surge in earnings led to a significant rise in its stock price, elevating the company’s market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive performance in the first quarter followed a series of new AI product launches related to the Gemini AI suite. At the recent Google I/O developer conference, Google showcased a futuristic universal AI assistant capable of interacting through users’ smart glasses and claimed that the latest iteration of its Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives remains cautious about the immediate impact of AI Overviews, he noted that it could support long-term monetization of Search. He also highlighted that AI is already providing a boost to Google Cloud, forecasting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth expressed similar optimism, designating Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and noted excitement regarding the progress of Generative AI leading up to Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that the current positive outlook on AI’s impact on Google may not guarantee long-term sales growth.