Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, attributing this to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search, which they believe will lead to increased sales. They expressed optimism in a recent research note, stating that the broader implementation of AI features would likely boost engagement in Google’s core Search business, despite initial issues with AI overviews garnering negative attention online. Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, largely driven by AI developments, which consequently raised its stock price and pushed its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed a series of AI product launches as part of its Gemini offerings. At the recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant capable of interacting through smart glasses, claiming that the latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Dan Ives from Wedbush remains somewhat cautious about the potential of AI Overviews, he acknowledged that they could eventually help with Search monetization. In his view, AI is already making a positive impact on Google Cloud, and he anticipates a 27% revenue growth for the Cloud segment compared to the previous year.
Doug Anmuth from J.P. Morgan expressed a similar positive outlook, designating Google as one of the top tech stock picks alongside Uber and Amazon, highlighting the encouraging advancements in generative AI ahead of Alphabet’s forthcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI for Google is favorable, it remains to be seen whether these technologies will lead to sustained sales growth in the future.