Google’s advancements in artificial intelligence are predicted to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to report earnings on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal anticipate that the integration of Gemini into Google Cloud and AI Overviews in Google Search will drive sales growth. They have raised their revenue outlooks for Google and increased their price target for its stock from $200 to $206. Despite some initial issues with the rollout of AI Overviews, the analysts remain optimistic about the broader application of AI across Google’s ecosystem, believing it will boost activity in the core Search business.
In April, Google reported a 60% surge in first-quarter profits, largely attributed to its AI advancements. This increase in profits led to a significant rise in its stock price, pushing the company’s market capitalization past $2 trillion, a feat achieved by Apple, Microsoft, and Nvidia as well.
Google’s first-quarter success followed the release of several new AI products under its Gemini AI offerings. At its recent developer conference, Google I/O, the company showcased its futuristic universal AI assistant, designed to interact through a user’s smart glasses. Google claims that its newest Gemini AI operates 20% faster than the latest version of ChatGPT.
Wedbush analyst Dan Ives was somewhat less enthusiastic about AI Overviews but acknowledged it could eventually boost Search monetization. He noted that AI is already positively impacting Google Cloud and predicted a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also expressed positive sentiments, listing Google as one of the firm’s top tech stocks along with Uber and Amazon. He expressed optimism about Google’s progress in generative AI ahead of Alphabet’s second-quarter earnings report.
Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is favorable, it remains uncertain whether AI will continue to drive long-term sales growth for the company.