Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively influence its second-quarter earnings, as Alphabet prepares to release its earnings report on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Google’s Gemini into its Cloud services and AI Overviews in Search will enhance sales. They stated in their research note, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This optimism comes despite some initial issues with AI overviews, which faced criticism for producing inaccuracies. The analysts have increased their stock price target for Google from $200 to $206.
In April, Google reported a significant profit increase of 60% in the first quarter, with AI contributing to this surge. This growth led to a spike in the company’s stock price, elevating its market valuation beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches under its Gemini offerings. At the recent Google I/O developer conference, the company introduced an advanced universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious stance on AI Overviews compared to Post and Bansal, he noted in a Monday report that it could provide a long-term benefit for Search monetization. Additionally, Ives indicated that AI is presently enhancing Google Cloud’s growth. He, along with other analysts, anticipates a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth expressed a similar positive outlook, labeling Google as one of the investment firm’s top tech stock choices, alongside Uber and Amazon. He highlighted the firm’s “encouragement from GenAI progress” ahead of Alphabet’s forthcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative around AI for Google is promising, its impact on long-term sales remains uncertain.