Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s upcoming second-quarter earnings, pointing to the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is expected to report its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing potential sales growth to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. In a recent research note, they expressed confidence that these AI enhancements would promote increased engagement in Google’s core Search operations, despite initial challenges encountered during the rollout of AI Overviews, which faced criticism for inaccuracies. They raised their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% rise in profits for the first quarter, significantly aided by its AI initiatives. This financial boost led to a surge in its stock price, elevating its market value beyond $2 trillion and placing it among tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed its introduction of new AI products as part of the Gemini AI offerings. At its major developer event, Google I/O, the company showcased a future AI assistant capable of visual and verbal interaction through smart glasses, claiming that its latest Gemini AI operates 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews compared to his peers but noted that it could contribute positively to Search monetization over time. He also highlighted that AI is already having a beneficial impact on Google Cloud, predicting a 27% increase in Cloud revenue year-over-year.
Echoing this optimistic perspective, J.P. Morgan’s Doug Anmuth named Google as one of the investment firm’s leading tech stocks alongside Uber and Amazon, citing excitement about the progress in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is encouraging, the long-term impact of AI on sales remains uncertain.