Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this adjustment to the company’s Gemini integration with Google Cloud and the implementation of AI Overviews in Google Search. They expressed optimism about the expanding AI functionalities across Google’s platforms, noting that the wider implementation of these features is expected to increase user engagement in the core Search segment, despite some early challenges with inaccuracies in the tool that became the subject of online humor. Consequently, they have raised their price target for Google’s stock from $200 to $206.
In its previous earnings report in April, Google announced a remarkable 60% profit surge in the first quarter, partly fueled by AI-driven initiatives. This impressive performance drove the company’s stock price up, resulting in a market capitalization exceeding $2 trillion, placing it among giants like Apple, Microsoft, and Nvidia.
Following months of unveiling new artificial intelligence products, Google’s positive performance in the first quarter was highlighted by its announcements at the Google I/O developer conference. Among the new offerings was a universal AI assistant capable of operating through a user’s smart glasses, with Google claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more tempered outlook on AI Overviews compared to Post and Bansal, he acknowledged that it could benefit Search monetization in the long run. He also noted that AI developments are already positively impacting Google Cloud, with a projected 27% revenue increase for the Cloud segment compared to last year.
J.P. Morgan’s Doug Anmuth echoed the optimistic outlook, naming Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, citing encouraging progress in Generative AI as Alphabet prepares to report its second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears promising, it remains uncertain whether AI will consistently drive long-term sales growth for the company.