Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google will experience a positive impact on its second-quarter earnings due to its advancements in artificial intelligence. The parent company, Alphabet, is scheduled to announce its earnings this Tuesday.
Both Bank of America and Wedbush have raised their revenue projections for Google, citing the integration of the Gemini AI tool into Google Cloud and AI Overviews in Google Search as key factors expected to enhance sales. Bank of America’s Justin Post and Nitin Bansal noted in a recent research report that the growing integration of AI across Google’s services is likely to stimulate increased activity in its core Search business, despite some initial challenges encountered during the rollout of AI Overviews, which faced criticism online for inaccuracies. Consequently, they have adjusted their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, attributed in part to its AI advancements. This strong performance led to a significant rise in its stock price, elevating the company’s market value beyond $2 trillion and placing it alongside Apple, Microsoft, and Nvidia.
The positive results in the first quarter followed a series of new AI product launches under the Gemini AI initiative. Highlights from Google’s recent developer conference, Google I/O, included a vision for a universal AI assistant capable of interacting via smart glasses. Google claims that its latest version of Gemini AI is 20% faster than the most recent ChatGPT.
While Wedbush’s Dan Ives expressed cautious optimism about the potential of AI Overviews, he acknowledged that it could benefit Search monetization over time. He also affirmed that AI is currently having a positive effect on Google Cloud and forecasts a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic outlook, designating Google as one of the firm’s top tech stock picks, along with Uber and Amazon, and expressing excitement about the progress in Generative AI ahead of Alphabet’s earnings report. However, Josh Beck, an analyst at Raymond James, cautioned that although the current narrative surrounding AI is favorable for Google, its long-term impact on sales remains uncertain.