Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence may enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue forecasts for Google, attributing this optimism to the integration of Gemini into Google Cloud and AI features in Google Search. They noted, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business,” despite some initial challenges in the rollout of AI overviews.
In April, Google reported a remarkable 60% rise in first-quarter profits, significantly influenced by its AI advancements, leading to a surge in its stock price and boosting its market valuation beyond $2 trillion, joining other tech giants like Apple and Microsoft.
The positive performance in the first quarter followed the launch of various AI products under the Gemini brand. Notably, during the Google I/O developer conference, the company introduced an AI assistant capable of interacting via smart glasses, claiming that its latest Gemini AI technology is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the potential of AI Overviews, he acknowledged its possible contributions to search revenue over time and highlighted that AI is already beneficial for Google Cloud. Ives anticipates Google will see a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth expressed similar optimism, identifying Google as one of the top tech stocks, alongside Uber and Amazon, and expressed encouragement regarding the progress in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the positive narrative surrounding AI, the long-term impact on Google’s sales remains uncertain.