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 disclose its earnings report on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have upgraded their revenue forecasts for Google, anticipating that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will drive sales growth.
In a research note released at the end of last week, they expressed optimism about the expanding use of AI in Google’s ecosystem, suggesting that a wider deployment of AI Overviews should increase user engagement in the core Search business, despite some initial challenges that resulted in comedic mishaps with the tool. They have also revised their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributable to its AI efforts. Following this report, the company’s stock price surged, elevating its market capitalization to beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The positive first-quarter results followed several months of launching new AI products under the Gemini AI umbrella. Notably, during the recent Google I/O developer conference, they introduced a future AI assistant capable of visual and verbal interaction via smart glasses. Google claims that its latest version of Gemini AI operates 20% faster than the latest ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on AI Overviews compared to Post and Bansal, noting that while it may contribute positively to Search revenue over time, its immediate impact remains uncertain. He mentioned that AI is already positively influencing Google Cloud, predicting a 27% increase in Cloud revenue from the previous year.
Doug Anmuth from J.P. Morgan shared a similarly optimistic view, highlighting Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressing encouragement regarding the progress of generative AI ahead of Alphabet’s earnings announcement.
However, analyst Josh Beck from Raymond James cautioned that despite the current positive narrative surrounding AI at Google, it remains to be seen whether this will translate into sustained sales growth in the long run.