Google’s advancements in artificial intelligence are expected to positively influence its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to release its earnings report after the bell on Tuesday.
Bank of America analysts, Justin Post, and Nitin Bansal have raised their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search as major factors contributing to increased sales. They remain optimistic about the growth of AI integration across Google’s ecosystem, anticipating that a broader adoption of AI Overviews will spur higher activity in the core Search business. They have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a 60% surge in profits for the first quarter, partly driven by AI innovations, which propelled the company’s market capitalization past the $2 trillion mark, joining tech giants like Apple, Microsoft, and Nvidia. This performance followed a series of new AI product releases under its Gemini AI offerings. During its developer conference, Google I/O, the company unveiled a future AI assistant expected to operate through smart glasses, claiming its latest Gemini AI is 20% faster than the newest ChatGPT.
Wedbush analyst Dan Ives acknowledged the potential of AI Overviews, suggesting it could become beneficial for Search monetization over time, even though he was less optimistic compared to Post and Bansil. He noted that AI is already enhancing Google Cloud’s performance and predicted a 27% increase in Cloud revenue from the previous year.
J.P. Morgan’s Doug Anmuth expressed a positive outlook, listing Google as one of the top tech stocks, along with Uber and Amazon. He stated that his team is encouraged by the progress in generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is promising, the long-term impact of AI on Google’s sales remains uncertain.