Analysts from Wedbush, J.P. Morgan, and Bank of America forecast a strong second-quarter earnings performance for Google, driven by artificial intelligence advancements. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue projections for Google, attributing the expected boost in sales to the integration of the Gemini AI system into Google Cloud and enhanced AI features in Google Search. They expressed optimism about the continued growth of AI across Google’s services, believing that wider adoption of AI overviews will positively impact user engagement in the Search division. Despite some initial setbacks during the rollout of AI overviews—where users noted errors that led to online ridicule—the analysts increased their price target for Google’s stock from $200 to $206.
In April, Google recorded a remarkable 60% profit increase for the first quarter, partly due to AI contributions, which subsequently drove its stock price upward, elevating the company’s market capitalization beyond $2 trillion alongside Apple, Microsoft, and Nvidia.
This positive momentum comes after several months of launching new AI tools under the Gemini brand. At the recent Google I/O developer conference, Google showcased a forward-looking AI assistant capable of interacting through smart glasses. They also claimed that the latest version of Gemini AI is 20% faster than the latest ChatGPT.
While Dan Ives from Wedbush has a more cautious stance on the potential of AI Overviews compared to Post and Bansal, he acknowledged that it could assist in increasing Search monetization in the long run. He noted that Google Cloud is already reaping benefits from AI, anticipating a 27% revenue increase in this segment compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similarly positive perspective, naming Google among the top tech stocks alongside Uber and Amazon, highlighting optimism about advancements in generative AI prior to Alphabet’s earnings announcement. However, Josh Beck from Raymond James cautioned that, despite the favorable current narrative surrounding AI, its long-term impact on driving sales for Google remains uncertain.