Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its earnings for the second quarter, with the company set to release its earnings report after the market close on Tuesday.
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Bank of America’s Justin Post and Nitin Bansal have raised their revenue projections for Google, attributing the expected increase to the integration of Gemini into Google Cloud and AI Overviews in Google Search, which they characterize as a driver for increased sales.
Despite some initial challenges with the rollout of AI Overviews, which attracted jokes for mistakes and inaccuracies, analysts remain optimistic. They anticipate that the broader application of these AI tools will enhance engagement in Google’s core Search business. Consequently, they have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported an impressive 60% rise in profits for the first quarter, largely driven by its AI initiatives, which in turn boosted its stock price and market capitalization past the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance comes after a series of AI product launches, particularly during its developer conference, Google I/O, where it introduced innovations such as a universal AI assistant capable of interacting through smart glasses. The company touts that its latest Gemini AI is 20% faster than ChatGPT.
While Wedbush’s Dan Ives has a more cautious view of AI Overviews compared to Post and Bansal, he notes that it has the potential to enhance Search monetization over time and recognizes the current boost that AI is giving to Google Cloud. Analysts predict a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, listing Google as one of his firm’s top tech stocks alongside Uber and Amazon. He expressed optimism regarding the progress of Generative AI ahead of Alphabet’s earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding AI is favorable for Google, the long-term impact on sales remains uncertain.