Google’s recent advancements in artificial intelligence are poised to enhance its performance in the upcoming second-quarter earnings report, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, will disclose its earnings on Tuesday.
Both Bank of America and Wedbush have revised their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America attribute anticipated sales growth to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search.
In a research note released last week, they expressed optimism about AI’s growing role across Google’s ecosystem, believing that a wider rollout of AI overviews will stimulate increased activity within the core Search business. This confidence persists despite some early challenges with AI overviews, which attracted online criticism for occasionally generating errors. Post and Bansal have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in first-quarter profits, partly driven by AI contributions, leading to a significant increase in its stock price and boosting its market capitalization to over $2 trillion, putting it in league with tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in Q1 followed months of introducing new AI products as part of its Gemini offerings. At the recent Google I/O developer conference, the company revealed plans for a comprehensive AI assistant capable of communicating via a user’s smart glasses. Google claims that its latest Gemini AI model is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that such tools could eventually bolster monetization of Search. He also pointed out that AI has already been beneficial for Google Cloud, projecting a 27% year-over-year rise in Cloud revenue in line with other Wall Street analysts.
Similarly, J.P. Morgan analyst Doug Anmuth shared a positive perspective, naming Google among the top technology stocks — alongside Uber and Amazon — and expressing optimism regarding advancements in generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI appears favorable, the long-term impact of AI on the company’s sales remains uncertain.