Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence (AI) will enhance the company’s earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to release its earnings report on Tuesday.
The stock of Darden Restaurants experienced a boost following a new delivery partnership with Uber. Analysts at Bank of America and Wedbush have increased their revenue forecasts for Google. Justin Post and Nitin Bansal from Bank of America attribute the expected sales growth to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search.
In a recent research note, they expressed optimism about AI’s role in enhancing user engagement within Google’s ecosystem and mentioned that the wider deployment of AI overviews could contribute to increased activity in the primary Search business. Despite some initial challenges with the AI Overviews, which attracted online ridicule for inaccuracies, Post and Bansal revised their price target for Google’s stock upward from $200 to $206.
Earlier this year, Google reported a remarkable 60% rise in profits in the first quarter, largely driven by AI revenues. This growth propelled the company’s stock, elevating its market capitalization beyond the $2 trillion threshold, placing it among the ranks of Apple, Microsoft, and Nvidia.
This positive momentum in the first quarter was fueled by the rollout of new AI products linked to the Gemini AI platform. Google’s recent announcements at the Google I/O developer conference included a futuristic universal AI assistant capable of visual and vocal interaction through smart glasses. The company asserts that its new Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush maintains a more cautious perspective on AI Overviews compared to his colleagues but noted that it has the potential to support Search revenue in the future. He also emphasized that AI is already making a significant impact on Google Cloud services, and like many analysts, expects a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared a positive outlook, designating Google as one of the top tech stocks to watch, alongside Uber and Amazon. He expressed enthusiasm for the progress in Generative AI as Alphabet prepares to announce its second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI potential is optimistic, the long-term effects on sales remain uncertain.