Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with the parent company Alphabet set to announce its earnings after the market closes on Tuesday.
According to analysts from Bank of America, Justin Post and Nitin Bansal, updates such as the integration of Gemini into Google Cloud and AI Overviews in Google Search are expected to bolster sales. They expressed optimism about the growing AI implementations across Google’s services and anticipate that the wider rollout of AI overviews will increase user engagement in its core Search operations, despite initial issues where the tool faced criticism for inaccuracies. They raised their price target for Google’s stock from $200 to $206 in a recent research note.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to its AI initiatives, which significantly increased its stock price and pushed its market value beyond the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results followed the release of various new AI products under the Gemini AI brand. At its recent Google I/O developer conference, the company unveiled a futuristic AI assistant capable of utilizing smart glasses for visual and verbal interaction, claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Wedbush analyst Dan Ives took a more cautious stance on AI Overviews, suggesting that while it may benefit Search monetization in the future, AI is already providing support for Google Cloud. He aligns with other Wall Street analysts in forecasting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared optimistic views, ranking Google among the preferred tech stocks alongside Uber and Amazon while highlighting the company’s progress in generative AI ahead of the upcoming earnings report. Meanwhile, analyst Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google is favorable, it remains uncertain whether these advancements will lead to sustained long-term revenue growth.