Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic about Google’s earnings report for the second quarter, largely attributing this positivity to the company’s advancements in artificial intelligence (AI). Alphabet, Google’s parent company, is expected to release its earnings after trading concludes on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue outlook for Google, noting that the integration of Gemini AI into Google Cloud, coupled with AI overviews in Google Search, is set to strengthen sales performance. In a recent research note, they expressed confidence that these growing AI integrations could enhance user activity in Google’s core Search business, even acknowledging past challenges during the initial rollout of AI overviews when the tool faced criticism online for inaccuracies. Consequently, they raised their price target for Google stock from $200 to $206.
In April, Google experienced a remarkable 60% increase in profits for the first quarter, significantly driven by its AI advancements, which propelled its stock price and elevated its market capitalization beyond $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia. This surge followed the introduction of various AI products under the Gemini initiative, including a future-forward AI assistant capable of interacting through smart glasses. Google boasts that its Gemini AI is now 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush maintains a slightly cautious view on the impact of AI overviews, he believes they may eventually benefit Search monetization. He also notes that AI is already positively influencing Google Cloud, with expectations of a 27% revenue increase from the previous year. J.P. Morgan’s Doug Anmuth shares this optimistic outlook, recognizing Google as one of the firm’s top tech investments alongside Uber and Amazon and expressing enthusiasm about the progress in generative AI (GenAI) as Alphabet approaches its earnings report.
However, caution is advised, as Raymond James analyst Josh Beck highlights the uncertainty regarding whether AI will yield sustained sales growth for Google in the long term.
This optimistic perspective towards AI’s impact on Google’s earnings not only reflects analyst confidence but also highlights the ongoing evolution and potential of technology to drive market success. As companies adapt and innovate within the AI space, investors and customers alike can anticipate exciting developments in the industry.