Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to announce its earnings after market close on Tuesday.
Following an analysis, Bank of America’s Justin Post and Nitin Bansal have revised their revenue projections for Google upwards, attributing this adjustment to the successful integration of the Gemini AI platform within Google Cloud and AI Overviews in Google Search.
In a research note released last week, they expressed optimism about the increasing integration of AI across Google’s services, noting that a wider adoption of AI overviews could lead to enhanced activity within the core Search business. This comes despite initial challenges with the AI overview tool, which faced criticism and became a target of internet memes for its inaccurate outputs. As a result, they have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit growth in its first quarter, partly driven by its AI initiatives. This surge in profits propelled its stock prices and propelled the company’s market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s successful start to the year was marked by the introduction of several new AI products as part of its Gemini AI initiative. Notably, during the Google I/O developer conference, the company showcased an innovative universal AI assistant designed to interact through smart glasses. Google has asserted that its latest Gemini AI is 20% quicker than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews compared to Post and Bansal, suggesting that while it might not have an immediate impact, it could aid in the monetization of Search over time. He also noted that AI is already enhancing the performance of Google Cloud, predicting a 27% revenue increase in that segment compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar optimistic perspective, naming Google among its top tech stock recommendations alongside Uber and Amazon, and indicating positive expectations for the company’s progress in Generative AI ahead of the upcoming earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding AI at Google is favorable, the long-term effects on sales and revenue remain uncertain.