Google’s advancements in artificial intelligence are projected to enhance its earnings in the second quarter, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company Alphabet is set to disclose its earnings results on Tuesday after the market closes.
Both Bank of America and Wedbush have updated their revenue expectations for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute the anticipated sales growth to the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search.
In a recent research note, they expressed optimism about the increasing incorporation of AI across Google’s services, stating that a wider introduction of AI overviews is likely to enhance user engagement in the core Search segment. This positive outlook comes despite initial challenges faced during the rollout of AI overviews, which were humorously critiqued online for some inaccuracies. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% rise in profits for the first quarter, largely attributed to its AI initiatives, leading to a surge in its stock price and a market valuation exceeding $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was bolstered by multiple AI product launches linked to its Gemini offerings. Significant updates announced during the Google I/O developer conference included a sophisticated AI assistant designed to interact through users’ smart glasses. Google asserts that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush displayed a more cautious stance regarding AI Overviews but acknowledged their potential to enhance Search monetization in the long run. He also noted that AI is positively impacting Google Cloud, anticipating a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan also shared a favorable perspective, naming Google among the top technology stocks, alongside Uber and Amazon, highlighting the firm’s enthusiasm for developments in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI is optimistic, the long-term effects on Google’s sales from AI integration remain uncertain.