Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI developments will enhance its second-quarter earnings, with Alphabet expected to release its earnings report after the market closes on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have revised their revenue predictions for Google, attributing potential sales boosts to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed a positive outlook on the growing AI integrations within Google’s ecosystem, believing that a more extensive rollout of AI Overviews could lead to increased activity in the core Search business. Despite some initial challenges with AI Overviews, which faced criticism for inaccuracies, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly influenced by AI advancements. This surge in profits contributed to a substantial rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, alongside industry giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed an array of new AI product launches as part of its Gemini AI suite. At the recent Google I/O developer conference, the company unveiled a future universal AI assistant capable of interacting via users’ smart glasses. Google claims that its latest Gemini AI technology is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives was more cautious about AI Overviews, he acknowledged their potential to positively impact Search monetization in the long run. He also noted that AI is already providing a boost to Google Cloud, expecting a 27% revenue increase from the previous year.
J.P. Morgan’s Doug Anmuth voiced similar optimism, listing Google as one of the investment firm’s top tech stock picks alongside Uber and Amazon, and expressed confidence in the progress of generative AI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears favorable, the long-term impact of AI on boosting sales remains uncertain.