Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Google parent company Alphabet is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, noting that the company’s integration of its Gemini AI into Google Cloud and AI Overviews in Google Search is expected to drive sales growth. They expressed confidence in the ongoing integration of AI throughout Google’s services, suggesting it will boost user engagement in the core Search business despite initial challenges with AI Overviews, which faced criticism for inaccuracies. As a result, they have 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 developments. This success contributed to a rise in stock price, elevating the company’s market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed extensive launches of new AI products under the Gemini brand, showcased at its recent developer conference, Google I/O. These included a futuristic AI assistant capable of interacting through smart glasses, with Google asserting that its latest Gemini model is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on the potential impact of AI Overviews, he acknowledged that it could aid in monetizing Search in the long run. Additionally, he noted that AI is already benefiting Google Cloud, predicting a 27% revenue growth from last year in that segment.
J.P. Morgan analyst Doug Anmuth echoed these positive sentiments, identifying Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, as anticipation builds for Alphabet’s second-quarter earnings. Conversely, Raymond James analyst Josh Beck cautioned that, although the current AI narrative looks promising, the long-term effect on Google’s sales remains uncertain.