Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are set to enhance its second-quarter earnings, with parent company Alphabet scheduled to release its financial results on Tuesday.
Both Bank of America and Wedbush have raised their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that Google’s integration of its Gemini AI into Google Cloud and AI Overviews in Google Search will significantly boost sales.
In a research note, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business,” despite some initial challenges with AI overviews that garnered humorous reactions online for inaccuracies. They have adjusted their price target for Google’s stock from $200 to $206.
Google experienced a remarkable 60% profit increase in the first quarter, largely attributed to AI, which led to a surge in its stock price and helped elevate the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s impressive first-quarter results came after months of unveiling new AI products, especially those under its Gemini AI initiative. Notably, the recent Google I/O developer conference showcased a universal AI assistant capable of interacting through users’ smart glasses, with Google touting that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
Dan Ives from Wedbush was somewhat cautious about the potential impact of AI Overviews compared to Post and Bansal but noted in a recent research note that it “may become a tailwind for Search monetization over time.” Additionally, he pointed out that AI is already having a positive effect on Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, a sentiment shared by several analysts.
Doug Anmuth from J.P. Morgan echoed these optimistic views, naming Google among their top tech stocks, alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, although the current AI narrative surrounding Google appears positive, the long-term impact of AI on sales growth remains uncertain.