Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its second-quarter earnings report, which is scheduled for release on Tuesday. Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue estimates, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as key drivers for sales growth.
In a recent research note, the analysts expressed a positive outlook on the growing AI implementations across Google’s platforms, suggesting that an expanded rollout of AI Overviews could lead to increased activity in its core Search business. This comes despite some initial challenges experienced during the rollout, which resulted in some humorous viral moments due to the tool’s inaccuracies. Consequently, they increased their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. The impressive performance propelled the company’s stock price and market capitalization past $2 trillion, aligning it with tech giants like Apple, Microsoft, and Nvidia.
Following a series of AI product launches, including advancements announced at the Google I/O developer conference, Google has been making significant strides in its Gemini AI offerings. The company claims its latest version is 20% faster than ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews on Search monetization, he acknowledged that AI is already positively influencing Google Cloud. He anticipates a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared a favorable outlook, labeling Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He mentioned being encouraged by the progress in Generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is favorable, it remains uncertain whether these advancements will lead to sustained long-term sales growth.