Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI initiatives will enhance its second-quarter earnings, as Alphabet prepares to release its earnings report after market hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Search as key drivers for potential sales growth. In a recent research note, they expressed optimism about the company’s ongoing AI integration, suggesting that an expanded implementation of AI overviews could lead to increased activity in Google’s core Search business, despite earlier challenges with the tool’s initial rollout.
In April, Google reported a remarkable 60% increase in profits for the first quarter, attributed in part to its advancements in AI. This surge in earnings led to a significant rise in its stock price, pushing the company’s market cap beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s first-quarter success followed the introduction of a series of new AI products under the Gemini brand. At its recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant that can interact via smart glasses. Google also stated that the latest iteration of its Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impact of AI Overviews on Search revenue, he noted that AI is already benefiting Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth joined the positive outlook, identifying Google as one of the company’s top technology stock picks, alongside Uber and Amazon, and expressing confidence in the advancements in generative AI ahead of the earnings report.
However, analyst Josh Beck from Raymond James cautioned that although the current narrative surrounding AI at Google is optimistic, the long-term effects on sales remain uncertain.