Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings performance, with Alphabet set to release its earnings report after trading hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue forecasts for Google, attributing the expected growth to the incorporation of Gemini into Google Cloud and the introduction of AI overviews in Google Search. They expressed optimism in a recent research note, noting that the broader implementation of AI overviews could positively impact user engagement in the core Search business, despite some initial challenges during the rollout that led to online ridicule over production errors. Consequently, the analysts adjusted their price target for Google’s stock from $200 to $206.
In its first-quarter report back in April, Google announced a remarkable 60% profit increase, largely driven by its AI initiatives, which significantly boosted its stock price and pushed its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The impressive first-quarter results were bolstered by numerous releases from Google’s Gemini AI suite. Recent announcements during the Google I/O developer conference included a futuristic universal AI assistant capable of interacting through users’ smart glasses. Google claims its new Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI overviews compared to his peers, suggesting that while they might be beneficial for Search monetization in the long run, it remains uncertain. However, he noted that AI is currently providing a boost to Google Cloud, and like several other Wall Street analysts, he predicts a 27% increase in Cloud revenue year-over-year.
Similarly, J.P. Morgan’s Doug Anmuth expressed a positive view of Google, designating it as one of their top tech stock picks alongside Uber and Amazon, and highlighting optimism regarding the progress in generative AI as Alphabet approaches its second-quarter earnings announcement.
Raymond James analyst Josh Beck, while recognizing the favorable current narrative surrounding Google’s AI efforts, cautioned that it is still uncertain whether AI will translate into sustained long-term sales growth for the company.