Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Alphabet, Google’s parent company, will showcase strong second-quarter earnings, scheduled for release after market close on Tuesday.
Both Bank of America and Wedbush have increased their revenue forecasts for Google. Analysts Justin Post and Nitin Bansal from Bank of America highlighted how the integration of Gemini into Google Cloud and AI Overviews in Google Search is expected to enhance sales. They expressed optimism about the growing AI capabilities within Google’s ecosystem, suggesting that a wider rollout of AI Overviews could lead to increased engagement in the core Search business. This comes despite earlier glitches during the initial AI Overviews rollout that prompted online ridicule for producing errors and inaccuracies. Consequently, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% boost in profits for the first quarter, largely attributed to AI innovations. This impressive performance caused its stock price to surge, raising its market capitalization above the $2 trillion mark, alongside tech giants like Apple, Microsoft, and Nvidia.
After months of new AI product launches tied to its Gemini AI initiative, Google’s first-quarter success was bolstered by announcements made during its Google I/O developer conference, including a forward-looking universal AI assistant designed for smart glasses. Google claims their latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Dan Ives from Wedbush expressed some reservations about the immediate impact of AI Overviews, he noted that it could still support Search monetization in the long run. He also pointed out that AI is already positively affecting Google Cloud, and he, alongside other analysts, anticipates a 27% rise in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth reinforced this positive outlook, designating Google as one of his firm’s top tech stock picks, along with Uber and Amazon, as he expressed excitement about GenAI developments ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI narrative is optimistic, the long-term effects of AI on Google’s sales remain uncertain.