Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to release its earnings report after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, attributing some of the positive outlook to the integration of Gemini into Google Cloud and new AI features in Google Search. They expressed confidence that the broader rollout of AI functionalities will drive increased engagement in Google’s core Search operations, despite initial challenges faced during the rollout phase. The analysts have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, driven in part by its AI initiatives. The company’s robust performance led to a surge in its stock price, resulting in a market capitalization exceeding $2 trillion, placing it alongside tech giants such as Apple, Microsoft, and Nvidia.
This strong showing followed numerous AI product launches linked to its Gemini offerings, including announcements made at the recent Google I/O developer conference. These included a futuristic AI assistant capable of interacting with users through smart glasses. Google asserts that its latest version of Gemini AI operates 20% faster than the most recent ChatGPT.
While Wedbush’s Dan Ives remains cautious about the immediate impact of AI Overviews on monetization, he noted in a report that it could enhance Search revenue in the long term. Ives also stated that AI is already having a positive effect on Google Cloud, predicting a 27% year-over-year increase in Cloud revenue, a sentiment shared by other Wall Street analysts.
J.P. Morgan analyst Doug Anmuth also expressed optimism about Google’s outlook, naming it one of the firm’s top tech stock picks alongside Uber and Amazon, and highlighted the promising progress in Generative AI leading up to the upcoming earnings report.
Conversely, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI’s impact on Google is positive, it remains to be seen whether this will translate into sustained sales growth in the long term.