Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is set to announce its earnings after market hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google, citing the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search as key drivers of increased sales. In a recent research note, they expressed optimism about the growing influence of AI across Google’s ecosystem and predict that a wider adoption of AI overviews could enhance user activity in the core Search segment. Despite initial issues during the AI overviews rollout, which attracted some criticism online, they have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, fueled in part by its AI initiatives. This impressive financial performance led to a significant rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion threshold, joining other tech giants like Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed several months of new AI product launches under its Gemini offerings. At its recent Google I/O developer conference, Google unveiled a futuristic AI assistant capable of visual communication through smart glasses. The latest Gemini AI has been touted as being 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on the AI Overviews compared to Post and Bansal, he acknowledged the potential for these tools to support Search monetization over time. Ives noted that AI is already having a positive impact on Google Cloud, forecasting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth echoed the optimistic view, naming Google among the firm’s top tech stock picks alongside Uber and Amazon. He expressed encouragement over the progress of generative AI leading up to Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, although the immediate outlook for Google’s AI endeavors is promising, the long-term effects of AI on the company’s sales remain uncertain.