Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are set to enhance its second-quarter earnings, with Alphabet scheduled to announce its earnings on Tuesday after market close.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, emphasizing that the integration of Gemini into Google Cloud and AI Overviews within Google Search is expected to drive sales. They expressed optimism about the growing presence of AI across Google’s services, noting that a wider rollout of AI overviews should lead to increased engagement with the core Search business. Despite some initial challenges with the AI overviews—prompting some humorous responses online due to errors and inaccuracies—Post and Bansal have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% rise in profits during the first quarter, largely attributed to its AI initiatives. This significant growth propelled the company’s stock price and pushed its market capitalization past the $2 trillion mark, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
Google’s successful first-quarter results followed a series of releases of new AI products, particularly those related to its Gemini AI platform. Among the announcements made at the recent Google I/O developer conference was a futuristic universal AI assistant capable of visual interaction through smart glasses. Google also claims its latest incarnation of the Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives is not as optimistic about the potential of AI Overviews as Post and Bansal, he remarked that these tools could eventually benefit Search monetization. He also noted that AI is already contributing positively to Google Cloud, anticipating a 27% year-over-year revenue increase in that segment.
J.P. Morgan analyst Doug Anmuth expressed a similar positive outlook, listing Google as one of his firm’s top tech stock picks alongside Uber and Amazon. He mentioned being encouraged by the advancements in generative AI ahead of Alphabet’s earnings announcement.
Conversely, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI at Google is optimistic, the long-term impact of AI on sales growth remains uncertain.