Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for the tech giant, citing the successful integration of Gemini into Google Cloud and enhancements in AI Overviews within Google Search as key drivers of growth. They expressed optimism about the broader rollout of AI features, which they believe will enhance user activity in the core Search business, despite some initial setbacks during the AI Overviews’ launch. As a result, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% surge in profits for the first quarter, largely attributed to its AI developments, which led to a spike in its stock price and elevated its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s impressive performance in the first quarter followed numerous new AI product launches, including innovations from its Gemini AI offerings. At the recent Google I/O developer conference, the company unveiled a universal AI assistant designed for user interaction through smart glasses, asserting that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives was more cautious about the potential of AI Overviews compared to Post and Bansal, he indicated that these developments could enhance Search monetization in the long run. He also noted that AI is already making significant contributions to Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
Meanwhile, J.P. Morgan’s Doug Anmuth expressed similar optimism, naming Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He highlighted the firm’s excitement about the progress in Generative AI ahead of Alphabet’s upcoming earnings announcement.
Raymond James analyst Josh Beck cautioned that while the current outlook on AI’s impact on Google is encouraging, the long-term effects on sales remain uncertain.