Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its performance in the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing growth to the integration of the Gemini AI platform into Google Cloud and the AI Overviews feature in Google Search. They expressed confidence in the impact of these AI innovations on the core Search business, despite some initial challenges with the AI Overviews tool. They also raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, largely attributed to AI developments, resulting in a significant increase in its stock price and pushing its market capitalization over $2 trillion.
Google’s strong first-quarter results came after a series of new AI product launches, including an ambitious initiative unveiled at the Google I/O developer conference. This initiative features a universal AI assistant capable of interacting through smart glasses, with Google asserting that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives was somewhat more cautious regarding the potential of the AI Overviews feature, he acknowledged that it could foster increased monetization for Google Search over time. He also noted that AI is already contributing positively to Google Cloud, with expectations for a 27% growth in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth echoed the optimistic outlook and highlighted Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, as they look forward to Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current narrative around Google’s AI is promising, it remains uncertain whether these advancements will lead to sustained sales growth in the long term.