Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet parent company set to release its earnings report on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have raised their revenue expectations for Google, noting that the integration of the Gemini AI into Google Cloud and the AI Overview feature in Google Search is likely to boost sales.
In a research note released last week, they expressed optimism about the growing presence of AI across Google’s platform, believing that a wider deployment of AI overviews will increase user engagement in the search business. This comes despite initial challenges during the AI overviews rollout, which generated humorous internet commentary due to inaccuracies. They increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in first-quarter profits, attributed partly to its AI innovations, which propelled its stock price and pushed the company’s market capitalization to over $2 trillion, alongside industry giants like Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was bolstered by the launch of new AI products as part of Google’s Gemini initiatives, including a universal AI assistant showcased at the Google I/O developer conference. This assistant is designed to function via smart glasses, with Google asserting that their latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives is less optimistic about the immediate impact of AI Overviews, he believes they could eventually support search monetization. He noted that AI is already contributing positively to Google Cloud and projected that Cloud revenue will increase by 27% year-over-year.
J.P. Morgan analyst Doug Anmuth also highlighted the favorable outlook for Google, naming it among the firm’s top tech stock picks alongside Uber and Amazon. He expressed enthusiasm for the progression of generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI developments appear promising, the long-term effect of AI on Google’s sales remains uncertain.