Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence could enhance its second-quarter earnings, with Alphabet set to release its financial results after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, highlighting the potential impact of integrating the Gemini AI within Google Cloud and incorporating AI Overviews into Google Search. They believe that these enhancements could lead to increased sales, stating in a recent research note, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” Their revised price target for Google stock has risen from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI developments, which propelled the company’s stock price and market capitalization past $2 trillion, placing it among industry giants like Apple, Microsoft, and Nvidia. This surge followed a series of new AI product launches under the Gemini AI initiative, including an ambitious universal AI assistant showcased at Google I/O that promises enhanced interaction capabilities via smart glasses. Google asserts that its latest Gemini AI version operates 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives expressed a more tempered outlook on AI Overviews, he noted that they “may become a tailwind for Search monetization over time.” Ives also indicated that Google’s cloud operations are benefiting from AI, projecting a 27% rise in Cloud revenue compared to the previous year.
Similarly, J.P. Morgan’s Doug Anmuth included Google among his firm’s top tech stock picks last week, expressing optimism about the progress in generative AI leading up to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding Google’s AI initiatives is favorable, it’s still uncertain whether these developments will result in sustained sales growth in the future.