Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence could significantly enhance its upcoming quarterly earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush adjusted their revenue projections for Google, with analysts Justin Post and Nitin Bansal citing the integration of Gemini into Google Cloud and AI features in Google Search as key drivers of potential sales growth. They expressed optimism about the increasing incorporation of AI within Google’s services and noted that a wider implementation of AI overviews could lead to more engagement in the core Search business. Despite some difficulties encountered during the initial rollout of AI overviews, which drew humorous criticism online, they raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, partly attributed to its AI initiatives, leading to a significant rise in its stock price and a market capitalization surpassing $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of new AI product releases under its Gemini AI umbrella. Among the announcements made at the recent Google I/O developer conference was a futuristic universal AI assistant capable of interactive communication through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s analyst Dan Ives expressed a more cautious view on AI Overviews compared to his colleagues, he indicated that they might gradually enhance search monetization. He also noted that AI is already benefiting the Google Cloud segment and anticipated a 27% increase in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, recognizing Google as one of the firm’s top tech stocks, alongside Uber and Amazon, and mentioned that his team is pleased with the progress in generative AI ahead of Alphabet’s second-quarter earnings report.
On the other hand, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is favorable, it remains uncertain whether AI will lead to sustained long-term sales growth.