Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after the market closes.
Distinct from how tech companies like Nvidia and Apple might benefit from Federal Reserve rate cuts, Bank of America analysts Justin Post and Nitin Bansal have updated their revenue forecasts for Google. They believe that the integration of Google’s Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search will drive increased sales.
In a recent research note, they expressed optimism about Google’s expanding AI capabilities, stating their belief that the broader availability of AI overviews will lead to increased user engagement in Google’s core search operations. This comes even after some initial challenges when the AI tool had faced criticism for inaccuracies. Consequently, they revised their price target for Google’s stock from $200 to $206.
In its first-quarter report from April, Google announced a significant profit increase of 60%, partially attributed to AI initiatives. This impressive performance resulted in a stock price surge that lifted the company’s market capitalization past the $2 trillion milestone, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first quarter was bolstered by a series of new AI product launches under its Gemini brand. Recent announcements at Google I/O highlighted an innovative AI assistant designed to interact through smart glasses, with Google asserting its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the potential of AI Overviews, he acknowledged they could positively influence monetization of search services over time. He noted that AI is already having a beneficial impact on Google Cloud services, predicting a 27% revenue increase for the division compared to last year.
J.P. Morgan analyst Doug Anmuth echoed the positive sentiment, naming Google among the firm’s preferred tech stocks alongside Uber and Amazon, citing encouragement from advancements in generative AI as they approach Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term impact of AI on driving sales remains uncertain.