Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, as the company prepares to release its financial results after trading ends on Tuesday.
Both Bank of America and Wedbush have revised their revenue forecasts upwards for Google. Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI technology into Google Cloud and the AI Overviews feature in Google Search will contribute to increased sales.
In a research note, they expressed optimism about the expanding use of AI throughout Google’s services and noted that a more extensive implementation of AI Overviews could lead to increased user engagement in the core Search segment. This optimism persists despite initial challenges with the AI Overviews rollout, which faced criticism for inaccuracies. Consequently, Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, partly attributed to its AI initiatives. This performance led to a significant increase in the company’s stock price, elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The impressive first-quarter results followed months of launching new AI-driven products aligned with the Gemini branding. At the recent Google I/O developer conference, the company introduced a futuristic AI assistant capable of interacting visually and verbally through smart glasses, claiming its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the AI Overviews, he acknowledged that they could positively impact Search monetization in the long run. He also highlighted that AI is already having a beneficial effect on Google Cloud, forecasting a 27% rise in Cloud revenue from the previous year.
Meanwhile, J.P. Morgan’s Doug Anmuth echoed this positive outlook, naming Google among its top technology stock picks, alongside Uber and Amazon, and expressing enthusiasm about the advancements in generative AI ahead of the upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that despite the current favorable narrative surrounding Google’s AI capabilities, it remains uncertain whether these initiatives will lead to sustained long-term sales growth for the company.