Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate a strong second-quarter earnings report for Google’s parent company, Alphabet, which is set to release its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue forecasts for Google, crediting the integration of its Gemini AI into Google Cloud and the AI Overviews feature in Google Search for potential sales boosts. Analysts Justin Post and Nitin Bansal from Bank of America expressed optimism about the growing influence of AI across Google’s services and believe the expansion of AI Overviews will enhance user engagement with the Search platform, despite earlier challenges during the initial rollouts that led to humorous criticisms online. They raised their price target for Google’s stock from $200 to $206.
In its previous report in April, Google announced a remarkable 60% increase in profits for the first quarter, a growth attributed significantly to AI advancements. This impressive performance resulted in a surge in the company’s stock price, elevating its market capitalization beyond $2 trillion, placing it among elite tech peers such as Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches as part of its Gemini AI initiative, including a futuristic universal AI assistant showcased at its Google I/O developer conference, which is designed to function through users’ smart glasses. The company claims its updated Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush expressed more caution regarding the potential long-term benefits of AI Overviews, he noted that they could eventually aid Search monetization. Ives also highlighted the positive influence AI is having on Google Cloud, forecasting a 27% rise in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook, naming Google as one of the firm’s top tech investment choices, alongside Uber and Amazon, citing excitement over the progress in generative AI ahead of the earnings report.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding AI is favorable for Google, the actual long-term impact on the company’s sales remains uncertain.