Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance its second-quarter earnings. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google, attributing the expected growth to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They are optimistic about the positive impact of AI advancements across Google’s platform and anticipate that a wider rollout of AI features will increase engagement in the core Search division. Despite glitches during the initial rollout of AI Overviews that resulted in some ridicule on social media, Post and Bansal 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, partly fueled by AI developments, which led to a significant rise in its stock price and pushed its market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product launches, particularly those related to its Gemini offerings. The latest innovations presented at the Google I/O developer conference included an advanced AI assistant capable of interacting through users’ smart glasses. Google claims that its newest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews compared to his counterparts, suggesting that while it might eventually support Search monetization, the immediate impact is uncertain. However, he noted that AI advancements are already benefiting Google Cloud, estimating a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan shared a positive outlook, listing Google as one of its top tech stock picks alongside Uber and Amazon, and highlighted encouragement from advancements in generative AI ahead of Alphabet’s upcoming earnings report.
Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google appears favorable, the long-term impact of AI on Google’s sales remains to be seen.