Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively influence its earnings for the second quarter, as the company’s parent, Alphabet, prepares to announce its earnings on Tuesday.
Bank of America and Wedbush have revised their revenue projections for Google upwards. Analysts Justin Post and Nitin Bansal from Bank of America highlighted the significant role of integrating Gemini into Google Cloud and AI Overviews in Google Search in enhancing sales.
In a recent research note, they stated, “We remain optimistic about the increasing AI integrations throughout Google’s ecosystem and believe that a more extensive rollout of AI Overviews will encourage greater engagement in the core Search business.” This optimism persists despite earlier challenges faced during the initial launch of AI Overviews, which drew negative attention for errors and inaccuracies. Post and Bansal increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, largely attributable to AI advancements, leading to a jump in stock price that propelled its market capitalization beyond $2 trillion, joining industry giants such as Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed a series of new AI product releases under the Gemini AI initiative. At the Google I/O developer conference, the company introduced an advanced AI assistant that can interact with users through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that it might contribute positively to Search monetization over time. He emphasized that AI is already enhancing Google Cloud, forecasting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared similar positive views, designating Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressing optimism about advancements in Generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the uplifting AI narrative, it remains uncertain whether AI will sustainably boost Google’s sales in the long term.