Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s developments in artificial intelligence are likely to enhance its earnings for the second quarter, with the parent company Alphabet scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue expectations for Google. They believe the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will contribute to increased sales. They expressed optimism about the continuing growth of AI features across Google’s platforms, predicting that broader implementation of AI overviews will generate more activity in the core Search segment, even acknowledging past challenges during the rollout of AI overviews that drew some online mockery due to errors. They have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a substantial 60% profit increase in the first quarter, driven partly by its AI innovations, which helped its stock price rise and pushed its market capitalization above $2 trillion, placing it among the ranks of Apple, Microsoft, and Nvidia.
Following a series of AI product launches in anticipation of its Gemini initiative, Google unveiled its most recent innovations at the Google I/O developer conference, showcasing a universal AI assistant capable of interacting through smart glasses. Google boasts that its latest Gemini AI performs 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on AI Overviews compared to his colleagues, he noted that these features could contribute positively to Search revenue in the long run. He also pointed out that AI is already positively impacting Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth echoed the positive outlook, naming Google as one of the firm’s preferred tech investments, alongside Uber and Amazon, and expressing optimism about the progress of Generative AI ahead of the second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding Google’s AI is favorable, its long-term impact on sales remains uncertain.