Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s AI initiatives could enhance its second-quarter earnings. Alphabet, Google’s parent company, is anticipated to release its earnings report soon after the market closes on Tuesday.
Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute potential sales growth to the integration of the Gemini AI into Google Cloud and the AI Overviews in Google Search. They noted their optimism regarding the ongoing integration of AI across Google’s various services and believe that a wider rollout of AI tools will stimulate greater activity within Google’s core Search business. They also adjusted their price target for Google’s stock from $200 to $206, despite some initial challenges with the AI Overviews tool that garnered some negative attention for its errors.
In the first quarter, Google reported a remarkable 60% profit increase, significantly influenced by AI advancements. This strong performance led to a surge in its stock price, elevating the company’s market capitalization over the $2 trillion threshold, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
This positive momentum followed months of new AI product releases under the Gemini AI framework. Notable innovations showcased at Google I/O included a universal AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI version is 20% faster than the newest ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the impact of AI Overviews, he indicated that it could ultimately contribute to increasing monetization of Search. Additionally, he stated that AI is already positively affecting Google Cloud, forecasting a 27% year-on-year revenue rise.
J.P. Morgan analyst Doug Anmuth also conveyed a positive outlook, identifying Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, and expressing optimism about advancements in generative AI prior to the earnings announcement.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI is favorable, the long-term effects on Google’s sales remain to be fully assessed.