Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter, as the parent company Alphabet prepares to release its earnings report on Tuesday.
Bank of America’s analysts, Justin Post and Nitin Bansal, have revised their revenue projections for Google upward, attributing this to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism regarding the rollout of AI features, which they believe will drive greater engagement in Google’s Search business. Despite some challenges during the initial launch of AI Overviews that resulted in some amusing errors, they have increased their price target for Google’s stock from $200 to $206.
In its April earnings report, Google revealed a remarkable 60% profit increase for the first quarter, benefiting in part from its AI innovations. Consequently, its stock price surged, elevating its market valuation beyond the $2 trillion milestone, putting it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter came after a series of new AI product launches under its Gemini brand. Notably introduced at the Google I/O developer conference was a universal AI assistant designed to interact through smart glasses. According to Google, its latest Gemini AI boasts a 20% higher speed compared to the latest version of ChatGPT.
Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews compared to his peers, suggesting it might contribute positively to Search monetization in the future, while also recognizing that AI is currently enhancing Google Cloud’s performance. He, along with others on Wall Street, anticipates a 27% year-over-year increase in Cloud revenue for Google.
J.P. Morgan’s Doug Anmuth reflected the prevailing optimism by naming Google among the top tech stocks his firm is tracking, alongside Uber and Amazon, as he noted encouraging developments in Generative AI ahead of Alphabet’s earnings report for the second quarter.
Conversely, Raymond James analyst Josh Beck pointed out that while the current outlook for Google’s AI is favorable, it remains uncertain whether these advancements will lead to sustained sales growth for the company in the long run.