Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings, with the parent company Alphabet set to announce its earnings after the market closes on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have increased their revenue projections for Google, highlighting how the integration of Gemini into Google Cloud and AI Overviews within Google Search could enhance sales. They noted in a recent research note that they maintain a positive outlook on the company’s expanding AI ecosystem, expecting a broader rollout of AI Overviews to elevate user engagement in the core Search operations. This optimism comes despite some initial challenges with the AI overview tool, which faced criticism for producing errors. The analysts 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, driven in part by AI developments, leading the stock price to surge and the company’s market capitalization to surpass $2 trillion, alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed extensive launches of new AI products under its Gemini AI umbrella. At the Google I/O developer conference, the company introduced an innovative universal AI assistant capable of interacting through smart glasses. Google has stated that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution about the long-term impact of AI Overviews, he acknowledged its potential as a supporting factor for Search monetization over time. He also highlighted that AI is already making a positive impact on Google Cloud, anticipating a 27% year-over-year increase in Cloud revenue.
Additionally, J.P. Morgan’s Doug Anmuth shared an optimistic perspective, naming Google among the top tech stocks alongside Uber and Amazon, expressing enthusiasm about the company’s advancements in Generative AI in advance of the second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable, the long-term implications for Google’s sales driven by AI need to be assessed further.