Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings. Alphabet, Google’s parent company, will announce its earnings results on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue forecasts for Google upwards, anticipating that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will boost sales. They expressed optimism regarding the growing presence of AI across Google’s ecosystem, suggesting that a broader implementation of AI overviews will increase engagement in the core Search business. This comes despite some challenges faced during the initial rollout, which led to humorous internet reactions due to the tool’s inaccuracies. They have increased their stock price target for Google from $200 to $206.
In April, Google reported a staggering 60% increase in profits for the first quarter, which was partly attributed to its AI initiatives. This announcement led to a significant rise in the company’s stock price, pushing its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s positive performance in the first quarter followed several new AI product launches, including its Gemini AI series showcased at the Google I/O developer conference. Notably, Google introduced a universal AI assistant capable of interacting through smart glasses, claiming that the latest version of Gemini is 20% faster than the latest ChatGPT.
Although Dan Ives of Wedbush expressed a more cautious view regarding AI Overviews, he acknowledged in a recent note that these developments might eventually benefit Search monetization. He noted that AI is already having a positive impact on Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth also conveyed a positive outlook, identifying Google as one of their leading tech stock picks alongside Uber and Amazon, while highlighting encouraging developments in generative AI as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is optimistic, the long-term impact of AI on the company’s sales remains uncertain.