Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, with Alphabet set to announce its earnings after market close on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have increased their revenue projections for Google, citing the company’s integration of the Gemini AI into Google Cloud and its new AI Overviews in Google Search as key drivers of increased sales. In a recent research note, they expressed confidence that the expansion of AI features throughout Google’s ecosystem will likely boost activity in its core Search business. They have adjusted their price target for Google’s stock from $200 to $206, despite the initial challenges faced during the rollout of AI Overviews, which attracted some internet criticism for inaccuracies.
Google reported a remarkable 60% profit increase in the first quarter of the year, partly attributed to its AI initiatives, leading to a significant rise in its stock price and a market valuation surpassing $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company has consistently launched new AI products, particularly showcased during its Google I/O developer conference. One notable announcement was the introduction of a universal AI assistant designed to integrate with smart glasses. Google claims its latest Gemini AI is 20% faster than its competitor ChatGPT.
Dan Ives from Wedbush adopted a more cautious stance regarding the AI Overviews, suggesting they might eventually contribute positively to Search monetization. He noted that AI is already having a favorable impact on Google Cloud, and expects a 27% revenue increase in that sector compared to the previous year.
Doug Anmuth from J.P. Morgan echoed the general optimism, identifying Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He mentioned that his team is encouraged by the progress in Generative AI leading up to Alphabet’s upcoming earnings report.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI developments is positive, it remains uncertain whether AI will significantly boost Google’s sales in the long term.