Marking a promising trajectory for Google’s financial performance, analysts from Wedbush, J.P. Morgan, and Bank of America have expressed optimism regarding the tech giant’s second-quarter earnings. Alphabet, Google’s parent company, is set to unveil its earnings report after the market closes on Tuesday.
Bank of America’s Justin Post and Nitin Bansal, along with analysts from Wedbush, have upgraded their revenue forecasts for Google, citing the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search as key factors that will enhance sales.
They noted in a recent research report, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This positive outlook comes despite some initial challenges with the rollout of AI Overviews, which have drawn playful criticism on social media for errors and fabricated information. Following this analysis, they increased their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% surge in profits for the first quarter, attributed mainly to its advancements in AI, which also led to a significant rise in its stock price, pushing its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results followed the release of numerous AI products under the Gemini brand. Highlights from the Google I/O developer conference included a universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI performs 20% faster than the most current version of ChatGPT.
While Dan Ives from Wedbush takes a somewhat tempered view on the potential long-term benefits of AI Overviews, he acknowledges that it might eventually support Search monetization. He believes that AI contributions are already observable in Google Cloud’s performance and anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook, naming Google alongside Uber and Amazon as one of the firm’s top tech stock picks, expressing encouragement about the advancements in Generative AI ahead of Alphabet’s forthcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that, although the current narrative surrounding Google’s AI is positive, it remains to be seen whether this will result in sustained long-term sales growth for the company.