Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with Alphabet scheduled to announce its earnings after the market closes on Tuesday.
The collaboration between Uber and Darden Restaurants has led to a notable rise in Darden’s stock. Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, citing the integration of the Gemini AI into Google Cloud and enhanced AI Overviews in Google Search as key drivers for sales growth.
They expressed optimism about the ongoing AI enhancements across Google’s ecosystem, suggesting that a broader implementation of AI Overviews will likely increase activity in Google’s core Search business. Despite some challenges during the initial rollout of AI Overviews, which experienced numerous errors and inaccuracies, the analysts 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, partly fueled by its AI initiatives. This surge in profitability resulted in a spike in the company’s stock price, elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed the launch of various new AI products under its Gemini AI initiative. Notably, during its recent developer conference, Google introduced an advanced AI assistant designed to interact through users’ smart glasses. The company claims that its latest Gemini AI is 20% quicker than the most recent version of ChatGPT.
Wedbush analyst Dan Ives offered a more cautious outlook on AI Overviews compared to Post and Bansal but still mentioned that it could eventually benefit Search monetization. He noted that AI is already contributing positively to Google Cloud, with expectations of a 27% growth in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook, designating Google as one of the firm’s top tech stock recommendations alongside Uber and Amazon. He emphasized enthusiasm surrounding the progress of generative AI in anticipation of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google appears favorable, the long-term impact of AI on the company’s sales remains uncertain.