Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
Bank of America analysts, Justin Post and Nitin Bansal, have updated their revenue projections for Google due to its integration of the Gemini AI into Google Cloud and the new AI Overviews feature in Google Search, which they believe will boost sales. They expressed optimism regarding the expanding AI capabilities within Google’s ecosystem, stating that a wider implementation of AI Overviews could lead to increased engagement with the core Search business. This comes despite some initial issues with the rollout, during which the tool garnered attention for producing errors. As a result, they have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, benefit from AI contributions. This prompted a significant rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of new artificial intelligence product launches related to its Gemini AI line. Among the latest announcements at its developer conference, Google I/O, was a universal AI assistant that could interact through a user’s smart glasses. Google claims that its new Gemini AI is 20% faster than the latest ChatGPT.
While Wedbush analyst Dan Ives expressed more cautious expectations regarding the AI Overviews, he noted that it could serve as a positive factor for Search monetization in the long run. Ives also highlighted that AI is already enhancing Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
Furthermore, J.P. Morgan’s Doug Anmuth expressed similar optimism, classifying Google as one of the investment firm’s top tech stocks alongside Uber and Amazon, and indicating a positive outlook for generative AI progress ahead of Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current conversation surrounding AI and Google is optimistic, the long-term impact of AI on the company’s sales remains uncertain.