Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Following the announcement of another quarterly loss, Trump Media saw its stock drop by 7%. Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue expectations 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 sales growth.
In a recent research note, Post and Bansal expressed optimism regarding the expansion of AI features throughout Google’s services, suggesting that the broader implementation of AI Overviews could enhance user engagement in Google Search, despite some initial challenges with the tool’s rollout. They have adjusted their price target for Google shares from $200 to $206.
Earlier this year, Google reported a remarkable 60% rise in profits for the first quarter, largely attributed to AI developments, prompting a surge in its stock price and elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s first-quarter success followed a series of new AI product launches as part of its Gemini initiative. One of the standout innovations showcased at the recent Google I/O developer conference is a universal AI assistant that could interact through smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed caution regarding the immediate impact of AI Overviews, he acknowledged the potential for them to support Search monetization in the long run. Ives also emphasized that AI is already enhancing Google Cloud, anticipating a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, naming Google among the investment firm’s top tech stocks alongside Uber and Amazon, and expressing optimism about the advancements in Generative AI ahead of Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI initiatives is favorable, the long-term impact on sales growth remains uncertain.