Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have revised their revenue projections for Google, attributing potential growth to the integration of Gemini AI into Google Cloud and the rollout of AI Overviews in Google Search. They expressed optimism about the potential of AI features to increase activity in Google’s core search business, despite minor issues during the initial launch that attracted some negative attention online. As a result, they raised their price target for Google’s stock from $200 to $206.
In its first-quarter report in April, Google experienced a notable 60% increase in profits, largely due to its AI initiatives, which led to a surge in stock prices and pushed its market capitalization over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed a series of AI product launches, including recent announcements made at the Google I/O developer conference, where they introduced a futuristic universal AI assistant designed to interact with users through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush holds a more cautious view on the long-term impact of AI Overviews, he acknowledged their potential as a future boost for search monetization and noted that AI is already enhancing Google Cloud. He, along with other analysts, anticipates a 27% growth in Cloud revenue compared to last year.
Doug Anmuth of J.P. Morgan also reiterated positive sentiments, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon, while expressing enthusiasm about the company’s progress in generative AI ahead of its upcoming earnings report.
However, Josh Beck from Raymond James cautioned that, while the current AI narrative for Google appears beneficial, the long-term implications for sales driven by AI remain uncertain.