Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with Alphabet expected to release its earnings report after market close on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this to the integration of Gemini into Google Cloud and AI overviews for Google Search. They expressed optimism about AI’s role in enhancing activity in the Search business despite initial challenges with the AI tool. Consequently, they raised their price target for Google’s stock from $200 to $206.
In its first quarter, Google reported a remarkable 60% increase in profits, largely driven by AI developments. This has resulted in a significant surge in its stock price, elevating the company’s market capitalization beyond $2 trillion, a milestone shared with Apple, Microsoft, and Nvidia.
The company’s strong quarterly performance followed a series of AI product launches under its Gemini AI initiatives. During its recent developer conference, Google I/O, the tech giant unveiled a vision for a universal AI assistant capable of interacting through users’ smart glasses, claiming that its latest Gemini AI is 20% faster than current models of ChatGPT.
While Wedbush’s Dan Ives was somewhat skeptical about the immediate impact of AI overviews, he noted that it could potentially benefit Search monetization over time. He also highlighted that AI has already started to enhance Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth supported the optimistic outlook, designating Google as one of the top tech investment opportunities, alongside Uber and Amazon, and expressing enthusiasm about progress in Generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable, the long-term impact of AI on Google’s sales remains uncertain.