Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advances in artificial intelligence (AI) will enhance the company’s earnings report in the second quarter. Google parent company Alphabet is scheduled to disclose its earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google, believing that the integration of the Gemini AI platform into Google Cloud and the introduction of AI Overviews in Google Search will lead to increased sales.
In a research note released at the end of last week, they expressed optimism about the expanding AI features within Google’s ecosystem, stating that a wider implementation of AI Overviews is likely to boost activity within the core Search business. This optimism persists despite initial challenges the AI Overviews faced, which garnered attention for producing inaccuracies. Consequently, Post and Bansal have revised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% surge in first-quarter profits, in part driven by AI advancements. This led to a significant increase in its stock price and elevated the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed months of new AI product releases associated with its Gemini platform. At its recent developer conference, Google I/O, the company unveiled plans for a universal AI assistant that could operate through smart glasses. Google claimed the latest version of Gemini AI is 20% faster than the current ChatGPT.
Dan Ives of Wedbush expressed a more cautious outlook on AI Overviews compared to his colleagues but noted in a Monday research note that it could potentially benefit search monetization in the long run. He also highlighted that AI is already positively impacting Google Cloud, and like other analysts, he predicts a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared a positive view, naming Google as one of the firm’s preferred tech stocks alongside Uber and Amazon. He remarked that his team is optimistic about the progress made in generalized AI (GenAI) leading up to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck issued a note of caution, suggesting that while the current AI narrative surrounding Google is favorable, the long-term impact of AI on Google’s sales remains uncertain.