Google’s advancements in artificial intelligence are anticipated to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to report its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Search as key drivers of expected sales growth. They expressed optimism about the potential of AI technologies to enhance activity within Google’s core Search business, despite initial challenges with the rollout of AI Overviews, which faced some ridicule for inaccuracies. As a result, they have raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits during the first quarter, thanks in part to its AI initiatives. This performance led to a spike in its stock price, pushing its market capitalization past the $2 trillion milestone, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results came after months of launching new AI products under its Gemini initiative. Recent announcements at the Google I/O developer conference included plans for a comprehensive AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives offered a more cautious perspective on the potential of AI Overviews, he acknowledged that it could enhance Search monetization over time. Ives noted that AI is already making a positive impact on Google Cloud, and he expects a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a favorable outlook, identifying Google as one of the firm’s top technology stocks, alongside Uber and Amazon, and expressed enthusiasm about the progress in generative AI leading up to Alphabet’s earnings report.
On the other hand, Raymond James analyst Josh Beck cautioned that the current positive sentiment surrounding AI may not guarantee long-term sales growth for Google.