Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively influence its second-quarter earnings as the company prepares to announce its results on Tuesday after market hours.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google, emphasizing that the integration of Gemini into Google Cloud and the deployment of AI Overviews in Google Search are likely to enhance sales. They expressed optimism about the growing AI features within Google’s ecosystem, believing that a wider release of AI overviews could lead to increased user engagement in its core Search segment. Despite some initial challenges with the AI Overviews—where the feature generated humorous mistakes—the analysts have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributed to its AI initiatives, which elevated its stock price and pushed its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
The positive performance in the first quarter followed the rollout of various new AI products under Google’s Gemini branding. The company’s latest announcements at its developer conference included a universal AI assistant capable of interacting through smart glasses, with Google claiming that its Gemini AI operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush took a more cautious view than his counterparts regarding AI Overviews, suggesting it might contribute positively to Search revenue over time. He acknowledged that AI is already having a favorable impact on Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth of J.P. Morgan also shared the optimistic outlook, ranking Google among the firm’s top technology stock picks alongside Uber and Amazon. He noted that his team is encouraged by progress in Generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current prospects for AI at Google appear bright, the long-term implications for sales growth remain uncertain.