Google’s artificial intelligence advancements are expected to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is scheduled to announce its earnings following the market close on Tuesday.
Analysts from Bank of America and Wedbush have adjusted their revenue forecasts for Google upward. They believe that the integration of Google’s new Gemini AI into Google Cloud and AI Overviews in Google Search will enhance sales. In a recent research note, Bank of America’s Justin Post and Nitin Bansal expressed their optimism regarding the growing adoption of AI across Google’s platforms, suggesting that the rollout of AI overviews will likely increase user engagement in the core Search business. They raised Google’s stock price target from $200 to $206, despite initial challenges with AI overviews that became a source of online humor due to errors and inaccuracies.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly attributed to its AI initiatives. This surge in performance drove its stock price up, allowing the company to achieve a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong results in the first quarter followed a series of new artificial intelligence product launches tied to its Gemini AI offerings. One of the highlights revealed at the Google I/O developer conference was a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI operates 20% faster than the most current version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he noted that they might contribute positively to Search monetization in the long run. Ives also remarked that AI has already begun to enhance Google Cloud’s performance and projected a 27% increase in Cloud revenue compared to last year.
Meanwhile, J.P. Morgan’s Doug Anmuth aligned with the optimistic outlook, identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He expressed enthusiasm about Google’s progress in generative AI in anticipation of Alphabet’s forthcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding AI and Google appears favorable, its potential to sustain sales growth in the long term remains uncertain.