Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s forthcoming second-quarter earnings report will be positively influenced by the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to release its earnings after market close on Tuesday.
Both Bank of America and Wedbush raised their revenue forecasts for Google, citing improvements from the integration of the Gemini AI into Google Cloud and enhanced AI features in Google Search. Bank of America’s analysts Justin Post and Nitin Bansal expressed optimism in a recent research note, stating that AI updates are likely to increase user engagement in Google’s core Search business. They mentioned that despite some early challenges with the AI tool generating errors and inaccuracies, they believe the rollout will enhance activity. Consequently, they adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives, which propelled its stock price above the $2 trillion market cap, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of AI product launches as part of Google’s Gemini offerings. Notable developments showcased at the Google I/O developer conference include an innovative AI assistant capable of interacting through users’ smart glasses, with Google asserting that its latest Gemini AI operates 20% faster than the current version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook on the AI Overviews, he acknowledged the potential for these features to enhance monetization of Google Search in the long term. He also noted that the AI developments are already benefiting Google Cloud, anticipating a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, listing Google among the firm’s top tech stocks alongside Uber and Amazon, and highlighting encouraging progress in Generative AI ahead of the upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, although the short-term outlook for Google appears promising, the long-term impact of AI on the company’s sales remains uncertain.