Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s upcoming second-quarter earnings report will reflect positive results, largely due to the company’s advancements in artificial intelligence (AI). Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this to the integration of Gemini AI into Google Cloud and AI Overviews in Google Search. They conveyed in a recent research note their positive outlook on the integration of AI across Google’s platforms, suggesting that a broader deployment of AI overviews could lead to increased activity in Search. Despite some early challenges with AI overviews, which experienced issues that drew online criticism, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a substantial 60% increase in profits for the first quarter, driven partly by its AI initiatives. This surge in profits resulted in a significant rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
This impressive first-quarter performance came on the heels of numerous launches of AI products under the Gemini brand, with notable announcements made during Google I/O. Among these was a universal AI assistant capable of visual and auditory interaction through smart glasses, with Google claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged their potential to positively affect Search monetization in the long run. Ives noted that AI is already enhancing Google Cloud’s performance, anticipating a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan also shared a positive outlook, designating Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, in light of the encouraging developments in generative AI.
However, Raymond James analyst Josh Beck cautioned that, despite the favorable narrative surrounding AI, the long-term impact of these advancements on Google’s sales remains uncertain.