Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings report. Google’s parent company, Alphabet, is expected to announce its earnings on Tuesday afternoon.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections for Google, attributing anticipated growth to the integration of its Gemini technology into Google Cloud and the inclusion of AI Overviews in Google Search. They expressed optimism about the ongoing AI enhancements within Google’s products, believing that a wider implementation of AI overviews will stimulate activity in the core Search business. They noted previous challenges with the AI overview tool, which received mixed reactions online for its errors. Following this analysis, the price target for Google’s stock was increased from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, significantly influenced by its AI developments. This impressive performance resulted in a rise in the company’s stock price, elevating its market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
The successful first-quarter results came after a series of AI product launches linked to Google’s Gemini project. Notable developments from the recent Google I/O conference included an advanced universal AI assistant capable of interacting through users’ smart glasses. Google claims its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the effects of AI Overviews, he acknowledged that it could positively influence Search monetization in the future. He also mentioned that AI is already contributing to growth in Google Cloud, projecting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth supported this optimistic viewpoint, ranking Google among the firm’s top tech stock picks alongside Uber and Amazon, and highlighted excitement regarding the advancements in Generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, despite the current positivity surrounding Google’s AI narrative, it remains uncertain whether AI will lead to sustained long-term sales growth for the company.