Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with the company set to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts, crediting the integration of Gemini into Google Cloud and AI Overviews in Google Search for expected sales increases. They expressed confidence that these AI enhancements will lead to increased user engagement in Google’s core Search business, despite initial challenges when AI Overviews faced criticisms for inaccuracies. They have raised their price target for Google’s stock to $206 from $200.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to AI innovations. This performance propelled the company’s market capitalization to over $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed several new product launches revolving around its Gemini AI line, showcased at the recent Google I/O conference. Notably, the new AI assistant aims to provide advanced functionalities through user smart glasses and is claimed to be 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged their potential in monetizing Search over time. He also noted that AI is already positively affecting Google Cloud, forecasting a 27% revenue increase in that segment year-over-year.
Doubling down on the positive outlook, J.P. Morgan analyst Doug Anmuth highlighted Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, commending the advancements made in generative AI. However, analyst Josh Beck from Raymond James cautioned that, while the current AI developments appear promising, the long-term impact on Google’s sales performance remains uncertain.