Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its earnings in the upcoming second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have elevated their revenue forecasts for Google, crediting the incorporation of its Gemini technology into Google Cloud and AI Overviews in Google Search for potential sales growth. They remain optimistic, stating that the broader implementation of AI Overviews could stimulate increased activity in Google’s core Search business, despite initial challenges during its rollout which attracted negative attention due to errors and inaccuracies. As a result, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a striking 60% increase in profits for the first quarter, bolstered by its AI initiatives, which resulted in a surge in stock price that pushed its market capitalization past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This strong performance followed a series of new AI product launches within Google’s Gemini suite. At the recent Google I/O developer conference, the company unveiled an innovative universal AI assistant capable of interacting through users’ smart glasses. Google claims its latest Gemini AI system is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, he acknowledged that it could become beneficial for Search monetization in the long run. He noted that AI is already having a positive impact on Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, a sentiment shared by many on Wall Street.
Doug Anmuth from J.P. Morgan also reflected a positive outlook, naming Google as one of the top tech stocks alongside Uber and Amazon. He highlighted the promising developments in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while Google’s current AI prospects appear bright, the long-term effects on sales remain uncertain.