Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will enhance its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings on Tuesday after the market closes.
Amidst a challenging week for Nvidia’s stock, Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google. They anticipate that the incorporation of Gemini into Google Cloud and the introduction of AI Overviews in Google Search will significantly boost sales.
In a research note released at the end of last week, they expressed optimism about the expanding role of AI within Google’s ecosystem and suggested that the wider implementation of AI overviews could result in heightened activity in the core Search business. This comes despite some initial hiccups, where AI overviews garnered attention for inaccuracies and absurdities. Following these updates, the analysts raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely attributed to its AI initiatives, which drove its stock price up and elevated the company’s market capitalization beyond $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The company’s impressive first-quarter results followed a series of AI product launches under the Gemini AI framework. Notable announcements made during the Google I/O developer conference included an advanced universal AI assistant capable of interacting through smart glasses. Google claims their latest Gemini AI product outperforms the newest ChatGPT by 20% in speed.
While Wedbush’s Dan Ives took a more cautious stance on the immediate impact of AI Overviews, he noted in a Monday research report that they could eventually support increased monetization of Search. Moreover, he agreed with other analysts that AI is already providing a boost to Google Cloud, with expectations of a 27% revenue surge from last year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic view, naming Google among his firm’s preferred technology stocks, which also includes Uber and Amazon. He highlighted his team’s favorable outlook on generative AI developments ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck issued a note of caution, emphasizing that while the current narrative around AI is positive for Google, the long-term impact on its sales remains uncertain.