Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence will enhance its earnings in the upcoming second quarter. Alphabet, Google’s parent company, is set to release its earnings report on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue forecasts for Google, attributing this to the integration of Gemini into Google Cloud and AI Overviews within Google Search, which they believe will stimulate sales growth.
In a recent research note, the analysts expressed optimism regarding AI integrations throughout Google’s platform, stating that a broader implementation of AI overviews is likely to increase activity in the core Search business, despite initial challenges during the rollout that resulted in some humorous online criticism related to inaccuracies. As a result, they have upgraded their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% jump in profits for the first quarter, partly driven by AI contributions. This strong performance led to a significant increase in its stock price, which elevated the company’s market value past the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches tied to its Gemini AI framework. Notable releases from the company’s recent developer conference, Google I/O, included a futuristic universal AI assistant designed to interact through a user’s smart glasses. Google claims that its latest Gemini AI is 20% quicker than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the long-term impact of AI Overviews on Search monetization, he acknowledged its potential as a future benefit. Furthermore, he noted that AI is already making a positive impact on Google Cloud, projecting a 27% year-over-year revenue increase from that segment.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic view, naming Google as one of his firm’s top tech stock picks, along with Uber and Amazon, citing encouraging advancements in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI initiatives is positive, the long-term effects on sales remain uncertain.