Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market close.
Bank of America’s Justin Post and Nitin Bansal have revised their revenue forecasts for Google, highlighting the positive impact of integrating the Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism in a recent research note, stating that the wider adoption of AI features would likely stimulate increased user engagement in the core Search business, despite some initial challenges with the AI Overviews tool. Following these updates, they upgraded their price target for Google’s stock from $200 to $206.
In April, Google announced a 60% profit increase in the first quarter, attributing part of this success to AI initiatives, which led to a surge in stock prices and elevated the company’s market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The company’s strong first-quarter performance was buoyed by numerous AI product releases, particularly from its Gemini AI offerings. At the Google I/O developer conference, Google unveiled a futuristic universal AI assistant designed to interact through smart glasses, claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he noted that it could support Search monetization in the long run. He also pointed out that AI is already contributing positively to Google Cloud, forecasting a 27% revenue increase in that sector compared to last year.
Adding to the positive outlook, J.P. Morgan’s Doug Anmuth listed Google among his firm’s top tech stock picks, alongside Uber and Amazon, as his team remains encouraged by advancements in generative AI in anticipation of Alphabet’s second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative surrounding AI, the long-term effects of AI on Google’s sales are still uncertain.