Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence may positively influence its second-quarter earnings. Alphabet, Google’s parent company, is anticipated to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google, attributing this to the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, they expressed optimism about AI developments across Google’s ecosystem, suggesting that a wider implementation of AI Overviews could lead to increased user activity in the core Search business. This comes despite some rocky moments during the initial rollout of AI Overviews, which faced criticism for generating errors and misinformation. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
Google reported a remarkable 60% profit increase in the first quarter due in part to AI, which then drove its stock price upwards, elevating its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The first quarter’s strong showing was fueled by a series of new AI products launched as part of Google’s Gemini AI suite. Notably, during the Google I/O developer conference, the company introduced a futuristic universal AI assistant capable of visual interaction through smart glasses. They regard the latest iteration of Gemini AI as being 20% more efficient than the latest version of ChatGPT.
Wedbush analyst Dan Ives was somewhat cautious regarding AI Overviews, remarking that while they may eventually aid Search monetization, their immediate impact remains uncertain. Nonetheless, he highlighted that AI is already contributing positively to Google Cloud, predicting a 27% year-over-year increase in its revenue, a sentiment echoed by other analysts.
J.P. Morgan analyst Doug Anmuth shared this optimistic outlook, naming Google among the top tech stocks, alongside Uber and Amazon, citing encouragement from the advancements in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable, its long-term impact on Google’s sales remains to be seen.