Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. The parent company, Alphabet, is expected to announce its financial results following the market close on Tuesday.
Bank of America and Wedbush have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI into Google Cloud and enhanced AI features in Google Search will significantly boost sales.
In a recent research note, they expressed optimism about the growing AI integrations throughout Google’s ecosystem, suggesting that the expanded use of AI features will boost engagement in the company’s core Search business. This comes despite some initial challenges with the AI overviews that drew negative attention online due to inaccuracies. They have increased their price target for Google stock from $200 to $206.
In April, Google reported an impressive 60% rise in profits for the first quarter, largely attributed to its AI initiatives. This strong performance led to a surge in its stock price, allowing the company to reach a market valuation exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following a series of new AI product launches as part of its Gemini AI initiative, Google’s upbeat first-quarter results were propelled by innovations showcased at its Google I/O developer conference. Among these was a futuristic universal AI assistant capable of interacting through smart glasses, which Google claims is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives is somewhat cautious about the long-term impact of AI Overviews, he acknowledged in a Monday research note that it could eventually serve as a boost for Search monetization. He noted that AI is already contributing positively to Google Cloud and anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also expressed optimism, identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and highlighted the group’s encouraging developments in generative AI before Alphabet’s forthcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the positive AI narrative surrounding Google, the long-term effects on the company’s sales remain uncertain.