Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings report, which is expected after the market closes on Tuesday.
Bank of America’s Justin Post and Nitin Bansal have increased their revenue predictions for Google, citing the incorporation of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search as key drivers for sales growth. In a recent research note, they expressed optimism about the impact of growing AI integrations within Google’s ecosystem, believing that a wider implementation of AI overviews will enhance activity in the core Search business, despite some initial issues with the rollout that led to unfavorable online reactions due to inaccuracies. They also elevated their price target for Google shares from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, fueled in part by its AI initiatives, which resulted in a significant rise in stock prices and pushed its market capitalization beyond $2 trillion, placing it alongside major tech players like Apple, Microsoft, and Nvidia.
The company’s robust performance in the first quarter was attributed to several new AI product launches under its Gemini AI offerings. Notably, during its recent Google I/O developer conference, Google unveiled ambitious projects including a universal AI assistant that promises to interact through smart glasses. Google claims its Gemini AI operates 20% faster than the latest version of ChatGPT.
Wedbush analyst Dan Ives took a more cautious stance on AI Overviews than his counterparts but indicated that it “may become a tailwind for Search monetization over time.” He also highlighted the significant impact of AI on Google Cloud, forecasting a 27% increase in Cloud revenue compared to the previous year.
Meanwhile, J.P. Morgan’s Doug Anmuth echoed the optimistic trend, recently labeling Google as one of the top technology stocks alongside Uber and Amazon. He noted his team’s encouragement regarding the progress of generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI developments is favorable, the long-term implications for driving sales remain uncertain.