Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will positively impact its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have raised their revenue forecasts for Google, citing the successful integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key factors in driving sales. They noted, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business,” despite encountering some issues during the initial rollout when the tool faced criticism for inaccuracies. The analysts have increased their price target for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% surge in profits for the first quarter, largely attributed to AI advancements. This resulted in a significant increase in the company’s stock price, boosting its market capitalization beyond $2 trillion and placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results followed several months of new AI product launches under the Gemini AI brand. At the recent Google I/O developer conference, the company unveiled a futuristic AI assistant capable of communicating through a user’s smart glasses. Google has claimed that its latest Gemini AI operates 20% faster than the latest ChatGPT version.
While Wedbush’s Dan Ives expressed some reservations about the potential of AI Overviews, he noted that they could become beneficial for Search monetization over time. Additionally, he indicated that AI is already enhancing Google Cloud’s performance, with expectations of a 27% revenue increase in that segment compared to last year.
J.P. Morgan’s Doug Anmuth also maintained a positive outlook, naming Google as one of its top technology stocks, alongside Uber and Amazon, and expressing optimism about the progress in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable narrative around AI, it remains uncertain whether these advancements will drive long-term sales growth for Google.