Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s recent advancements in artificial intelligence will enhance its earnings outlook for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have raised their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America highlighted the positive impact of integrating Gemini AI into Google Cloud and AI Overviews in Google Search on sales.
In a research note released last week, they expressed optimism about the ongoing AI integrations within Google’s ecosystem, noting that a wider rollout of AI overviews could increase user engagement in the core Search business. This comes even after the initial implementation of AI overviews faced criticism due to inaccuracies and errors, which became a topic of ridicule online. Post and Bansal have adjusted their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, partly attributed to AI developments. Following this announcement, the company’s stock surged, elevating its market capitalization to over $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter stemmed from a series of new AI product launches linked to its Gemini AI initiatives. Among the highlights from the recent Google I/O developer conference was a concept for a universal AI assistant that can interact through smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the new version of ChatGPT.
Dan Ives from Wedbush was more cautious regarding AI Overviews, suggesting that while it might contribute positively to Search monetization gradually, the immediate impact may be limited. He noted the boosting of Google Cloud revenue through AI, predicting a 27% increase compared to the previous year, aligning with the views of other Wall Street analysts.
Doug Anmuth from J.P. Morgan shared an encouraging outlook, naming Google among the top tech stocks alongside Uber and Amazon, citing confidence in the advancements in generative AI ahead of the anticipated second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI is largely positive, the long-term effects on the company’s sales remain uncertain.