Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s advancements in artificial intelligence will boost its second-quarter earnings. Alphabet, Google’s parent company, is set to announce its earnings on Tuesday.
Both Bank of America and Wedbush have updated their revenue forecasts for Google, highlighting the impact of integrating AI tools like Gemini into Google Cloud and the AI Overviews in Google Search. Bank of America’s Justin Post and Nitin Bansal mentioned that these integrations are expected to enhance sales significantly.
In a recent research note, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and believe the broader rollout of AI overviews will stimulate higher activity in the core Search business.” They acknowledged some initial issues with AI overviews, which faced criticism for inaccuracies, but they have still increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, partially attributed to its AI initiatives, resulting in a surge of its stock price and pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The encouraging first-quarter results followed the debut of various AI products as part of Google’s Gemini offerings. Among the highlights from the Google I/O developer conference was a universal AI assistant capable of visual and verbal interaction through smart glasses, with Google asserting that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the AI Overviews, suggesting they may positively influence Search monetization in the long term, he noted that AI is already contributing to gains in Google Cloud. Ives and many Wall Street analysts anticipate a 27% growth in Cloud revenue year-over-year for Google.
J.P. Morgan’s Doug Anmuth echoed this optimistic outlook, identifying Google as one of the firm’s top technology stocks, along with Uber and Amazon, and expressing encouragement over advancements in generative AI ahead of Alphabet’s quarterly earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI developments is favorable, it remains uncertain whether this will translate into sustained long-term sales growth for the company.