Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence (AI) are likely to enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal expressed optimistic views on Google’s revenue prospects, highlighting the integration of Gemini AI into Google Cloud and AI Overviews in Google Search as key contributors to sales growth. Despite some initial challenges with the rollout of AI Overviews, which faced criticism for inaccuracies, they maintained a positive outlook. They have increased their price target for Google’s stock from $200 to $206.
This comes on the heels of Google reporting a remarkable 60% increase in profits in the first quarter, driven in part by AI innovations. The impressive results resulted in a significant increase in the company’s stock price, elevating its market capitalization beyond $2 trillion, placing it alongside other tech giants such as Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was fueled by the launch of new AI products under the Gemini AI brand, including a universal AI assistant designed to interact through smart glasses. Google claims this latest AI iteration operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious perspective on the long-term impact of AI Overviews, he acknowledged that AI is already positively influencing Google Cloud revenue, predicting a 27% year-over-year increase in Cloud earnings.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook for Google, naming it one of his top tech stock picks alongside Uber and Amazon, as he remains optimistic about the progress in generative AI leading up to Google’s quarterly earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative surrounding Google, the long-term impact on sales remains uncertain.