Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Google’s parent company, Alphabet, is slated to announce its earnings on Tuesday.
In light of a new delivery partnership with Uber, Darden Restaurants saw a significant boost in its stock price.
Analysts at Bank of America, including Justin Post and Nitin Bansal, have increased their revenue projections for Google. They highlight the company’s incorporation of the Gemini AI system into Google Cloud and the implementation of AI Overviews in Google Search as key factors for anticipated sales growth.
The analysts stated in a recent research note that they remain optimistic about the expanding AI capabilities within Google’s ecosystem, believing that a wider distribution of AI Overviews will likely enhance user engagement with the core Search service. This comes despite some initial setbacks in the AI Overviews launch, which faced public mockery for generating errors. As a result of these updates, Post and Bansal increased their price target for Google stock from $200 to $206.
In its April earnings report, Google announced a remarkable 60% profit increase for the first quarter, largely attributed to AI innovations, which propelled its stock price and helped the company reach a market valuation exceeding $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results followed a series of new AI product releases under its Gemini AI initiative. During the recent Google I/O developer conference, Google showcased a futuristic AI assistant with capabilities to interact through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives was more cautious regarding the impact of AI Overviews, he noted that they could serve as a beneficial factor for monetizing Search in the long run. Additionally, he mentioned that AI technologies are already providing a boost to Google Cloud, projecting a 27% increase in cloud revenues compared to last year.
Echoing the positive outlook, J.P. Morgan’s Doug Anmuth listed Google as one of the leading tech stocks for investment, alongside Uber and Amazon. He expressed optimism about the advancements in generative AI leading up to Alphabet’s earnings report.
Nevertheless, Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google is favorable, its long-term impact on sales growth remains uncertain.