Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence initiatives could positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Analysts from Bank of America and Wedbush have adjusted their revenue projections for Google upwards. Justin Post and Nitin Bansal from Bank of America highlight the positive effects of integrating Gemini into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, they expressed optimism about the expanding AI features within Google’s platform, suggesting that a wider deployment of AI Overviews could lead to increased activity in the core Search business. This optimistic outlook comes despite some initial missteps with AI Overviews, which faced ridicule online due to inaccuracies. Consequently, they have raised their price target for Google’s stock from $200 to $206.
Google reported an impressive 60% increase in profits during the first quarter, driven in part by its AI advancements. This surge in profit contributed to a significant rise in stock prices, elevating the company’s market value beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong performance in the first quarter followed the launch of numerous new AI products under its Gemini AI brand. One of the highlights from the Google I/O conference was an advanced universal AI assistant capable of interacting through smart glasses. Google claims its Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious perspective regarding AI Overviews compared to Post and Bansal. However, he noted that these features “may become a tailwind” for Search monetization in the future. He believes that AI is already making a significant impact on Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, reflecting a consensus among Wall Street analysts.
Doug Anmuth from J.P. Morgan echoed the positive sentiments, ranking Google among the firm’s top tech stock picks alongside Uber and Amazon. He expressed optimism about the progress in generative AI as Alphabet prepares to announce its second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative for Google appears promising, it remains uncertain whether AI will significantly boost the company’s sales in the long term.