Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to contribute positively to its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
According to Bank of America analysts Justin Post and Nitin Bansal, Google’s integration of its Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search are expected to enhance revenue. They expressed optimism about the potential of these AI integrations to boost activity in the core Search business, despite a rocky start for the AI Overviews tool, which faced criticism for producing errors. They have raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This surge led to a rise in the stock price, allowing Google to surpass a $2 trillion market capitalization, joining industry giants like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results were boosted by a series of new AI product launches, particularly under its Gemini AI brand. Among the latest announcements at the Google I/O developer conference was a universal AI assistant capable of interacting through smart glasses, with Google asserting that its newest Gemini AI functions 20% faster than the latest ChatGPT.
While Dan Ives of Wedbush was cautious about the immediate impact of AI Overviews, he acknowledged that it could potentially benefit Search monetization in the longer term. He emphasized that AI is already enhancing Google Cloud, predicting a 27% increase in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan echoed the optimistic outlook, naming Google as one of his top tech stock picks, alongside Uber and Amazon, and expressing encouragement regarding the progress of generative AI ahead of Alphabet’s earnings report.
However, Josh Beck from Raymond James cautioned that although the current narrative surrounding AI at Google is positive, the long-term impact on sales remains uncertain.