Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is set to release its earnings report after the market closes on Tuesday.
Bank of America and Wedbush have raised their revenue expectations for Google. Analysts Justin Post and Nitin Bansal highlighted that the integration of Gemini into Google Cloud and the addition of AI Overviews in Google Search are likely to boost sales. They expressed optimism about the growing AI features within Google’s ecosystem, believing that a broader deployment of AI overviews will enhance activity in the core Search business. This comes even after some unforeseen issues with the initial launch of AI overviews, which drew humor for its errors. As a result, they adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to AI, leading its stock price to surge and its market capitalization to exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s positive performance followed a series of new AI product releases, particularly the Gemini AI series showcased at the Google I/O developer conference. This included a next-generation universal AI assistant designed to interact through smart glasses. Google claims its Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives of Wedbush tempered his enthusiasm for AI Overviews compared to Post and Bansal but noted that these features could eventually aid in Search monetization. He also indicated that AI is already contributing positively to Google Cloud, forecasting a 27% revenue growth in this sector compared to the previous year.
J.P. Morgan’s Doug Anmuth shared an optimistic outlook, listing Google among its top tech stock recommendations, along with Uber and Amazon, stating that his team is pleased with the progress in generative AI as the second-quarter earnings report approaches.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google and AI is favorable, it remains uncertain whether AI will significantly boost Google’s sales in the long run.