Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will contribute positively to its second-quarter earnings, set to be announced after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the AI Overviews feature in Google Search as key drivers of increased sales. They expressed optimism in a research note, stating that the broader implementation of AI Overviews could enhance user engagement in the core search business, despite some early issues that led to humorous criticisms online regarding the tool’s inaccuracies. Consequently, they increased their price target for Google’s stock from $200 to $206.
In its April earnings report, Google indicated a remarkable 60% jump in profits for the first quarter, a surge attributed in part to its AI initiatives, which helped elevate the company’s market capitalization to over $2 trillion, joining tech giants Apple, Microsoft, and Nvidia.
Google’s positive first-quarter results followed several months of new AI product launches, including the Gemini AI offerings introduced at the recent Google I/O developer conference. Highlights included the unveiling of a universal AI assistant capable of interacting through a user’s smart glasses, with Google asserting that its latest Gemini model is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives was somewhat reserved about AI Overviews’ immediate impact, he acknowledged that it could gradually support Search monetization. He noted that AI is already benefiting Google Cloud, with expectations of a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth conveyed a similar optimistic outlook, designating Google as one of the firm’s top tech stock picks alongside Uber and Amazon, and expressing enthusiasm regarding the advancements in Generative AI prior to Alphabet’s earnings report.
However, analyst Josh Beck from Raymond James cautioned that, although the current AI-focused narrative surrounding Google is favorable, the sustainability of AI’s impact on long-term sales remains uncertain.