Google’s recent advancements in artificial intelligence are expected to enhance its earnings for the second quarter, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company Alphabet is scheduled to announce its earnings Tuesday evening.
Both Bank of America and Wedbush have raised their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will significantly boost sales.
In a research note, they expressed optimism about AI’s growing presence across Google’s ecosystem, suggesting that the wider deployment of AI Overviews could lead to increased activity in the core Search business. This positive outlook comes despite some initial challenges with the AI Overviews tool, which faced criticism for producing errors. Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, driven in part by its AI advancements. As a result, its stock price soared, helping the company reach a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was attributed to a series of new AI product releases, particularly from its Gemini AI suite. Google’s recent announcements at its developer conference, Google I/O, included plans for a universal AI assistant capable of interacting via smart glasses. The company claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives is somewhat cautious about the impact of AI Overviews, he noted that they could become a positive factor for Search monetization over time. He also highlighted that AI is already benefiting Google Cloud, predicting a 27% revenue increase in that sector compared to last year.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook, labeling Google as one of their top tech stock picks, alongside Uber and Amazon, and expressing encouragement about the developments in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while Google’s AI narrative appears positive now, it remains uncertain whether AI will sustain sales growth for the company in the long run.