Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections for Google, attributing expectations of higher sales to the integration of the Gemini AI system into Google Cloud and the implementation of AI Overviews in Google Search. In their recent research note, they expressed a positive outlook on the growing role of AI within Google’s ecosystem and indicated that a broader rollout of AI features is expected to increase user engagement on the Search platform. Despite some initial challenges with AI Overviews, which faced online criticism for generating errors, they have raised their stock price target for Google from $200 to $206.
Following a 60% profit surge in the first quarter, largely driven by AI innovations, Google saw its stock price rise significantly, resulting in a market capitalization exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter was bolstered by a series of new AI product launches, including updates at its Google I/O developer conference, where it introduced an advanced universal AI assistant capable of interacting through smart glasses. The company has claimed that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Dan Ives of Wedbush expressed a more cautious view regarding the potential of AI Overviews, he noted that it could gradually enhance monetization for the Search service. He also highlighted the positive impact of AI on Google Cloud, predicting a 27% growth in Cloud revenues compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar optimistic outlook, designating Google as one of the leading tech stocks in the firm’s portfolio alongside Uber and Amazon. He expressed confidence in the advancements of generative AI ahead of Alphabet’s upcoming earnings announcement. Conversely, Josh Beck from Raymond James cautioned that, despite a positive current narrative surrounding AI’s influence on Google, it remains uncertain whether AI will consistently drive long-term sales growth for the company.