Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence (AI) will significantly enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue forecasts for Google, attributing this to the company’s implementation of its Gemini system within Google Cloud and AI Overviews in Google Search, which they believe will lead to increased sales.
In a recent research note, they expressed optimism about the expanding AI integrations throughout Google’s services, stating that the wider deployment of AI overviews is likely to enhance engagement in the core Search business. This follows some initial challenges with the AI overview tool, which faced criticism online for inaccuracies. As a result of this positive outlook, Post and Bansal raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in first-quarter profits, largely attributed to its AI innovations. This surge led to a significant increase in its stock price, pushing its market capitalization above $2 trillion, joining the ranks of other tech giants like Apple, Microsoft, and Nvidia.
Google’s strong Q1 performance came after the release of various AI products under the Gemini AI banner. At its recent Google I/O developer conference, the company presented a vision for a universal AI assistant capable of interacting through a user’s smart glasses. Google also contends that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on the impact of AI Overviews, he noted they could eventually benefit Search revenue. Ives also remarked that AI is already positively influencing Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth similarly expressed optimism and listed Google as one of the firm’s top technology stocks along with Uber and Amazon. He noted that his team is encouraged by advancements in generative AI as the company prepares for its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the positive current AI narrative surrounding Google, the long-term impact of AI on the company’s sales remains uncertain.