Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings report, thanks to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have adjusted their revenue forecasts for Google upward. Analysts Justin Post and Nitin Bansal from Bank of America highlighted the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search as key drivers of increased sales.
The analysts expressed confidence in the ongoing expansion of AI features throughout Google’s ecosystem, believing that a wider application of AI overviews will lead to heightened engagement in Google Search. This optimistic outlook comes despite some initial troubles faced by the AI overview tool, which sparked internet memes due to its inaccuracies. The price target for Google’s stock has been raised from $200 to $206.
In its last earnings report in April, Google announced a remarkable 60% profit increase for the first quarter, partially attributed to AI, which resulted in a significant rise in its stock price and elevated its market capitalization to over $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s robust first-quarter performance was bolstered by a series of new AI product launches under its Gemini brand. Notably, during the Google I/O developer conference, Google revealed plans for a universal AI assistant that would enable communication through smart glasses. Google claims that the latest version of Gemini AI is 20% faster than ChatGPT.
While Wedbush’s Dan Ives is somewhat cautious about the immediate impact of AI Overviews, he noted that it could enhance Search monetization in the long run. He also mentioned that AI is already positively impacting Google Cloud, forecasting a 27% rise in Cloud revenue year over year.
Doug Anmuth from J.P. Morgan also shared an upbeat perspective, naming Google among its top tech stock recommendations, alongside Uber and Amazon. He expressed optimism regarding the progress in generative AI ahead of Alphabet’s earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google is optimistic, the long-term impact of AI on Google’s sales remains uncertain.