Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its earnings for the second quarter, with Alphabet, Google’s parent company, set to unveil its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing the anticipated boost to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. In a research note issued late last week, they expressed optimism regarding the growing AI integration across Google’s ecosystem, believing that a wider rollout of AI overviews will enhance activity within the core Search segment. This positive outlook comes despite some initial challenges faced by the AI Overviews, which garnered criticism online for generating errors. As a result of these insights, they have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly aided by its AI developments. This strong financial performance propelled the company’s stock price upward, elevating its market capitalization to exceed $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed an active period of launching new AI-related products, notably as part of its Gemini AI suite. During its recent developer conference, Google I/O, the company introduced a universal AI assistant capable of visually and verbally interacting with users via smart glasses. The company has also asserted that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush was somewhat more cautious regarding the AI Overviews compared to Post and Bansal, he acknowledged that they might eventually provide a boost to Search monetization. Ives also noted that AI is already playing a role in enhancing Google Cloud, forecasting a 27% rise in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan shared an optimistic view, identifying Google as one of the firm’s top technology stocks alongside Uber and Amazon. He highlighted the encouraging progress in Generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI is positive, it remains uncertain whether AI will consistently drive long-term sales growth for the company.