Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence advancements will enhance its earnings for the second quarter, with Alphabet scheduled to announce its financial results on Tuesday evening.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of Gemini into Google Cloud and AI Overviews within Google Search will contribute positively to sales.
In a recent research note, they expressed optimism about the growing AI features across Google’s platforms, stating that the more extensive implementation of AI overviews is likely to increase activity in the company’s core Search business. This optimism comes despite some initial issues with the rollout of AI overviews, which drew criticism online for errors and inaccuracies. As a result of these insights, Post and Bansal raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely attributed to its AI initiatives. This surge in profits led to a significant increase in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The strong first-quarter results followed a series of new AI product launches as part of Google’s Gemini AI offerings. At the recent Google I/O developer conference, the company unveiled innovative technologies, including a future universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI outperforms the newest version of ChatGPT by 20%.
While Wedbush’s analyst Dan Ives is somewhat cautious about AI Overviews, he noted in a Monday research note that the feature could potentially assist in Search monetization over time. He also highlighted that AI is already positively impacting Google Cloud revenue, predicting a 27% increase from last year, similar to forecasts from other analysts.
Doug Anmuth from J.P. Morgan shared a positive outlook, naming Google as one of the investment firm’s top technology stocks alongside Uber and Amazon. He expressed his team’s encouragement regarding progress in General AI ahead of Alphabet’s soon-to-be-released second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current sentiment around AI for Google is favorable, the long-term impact on sales remains uncertain.