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 report, which Alphabet, Google’s parent company, is set to release Tuesday after the market closes.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google, attributing the expected growth to the integration of the Gemini AI program into Google Cloud and the introduction of AI Overviews in Google Search. In a research note, they stated their belief that expanding AI applications across Google’s ecosystem will enhance activity in its Search segment, despite some initial issues with AI Overviews that attracted criticism for inaccuracies. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit increase for the first quarter, partly credited to its AI efforts, which resulted in a significant rise in its stock price and a market capitalization exceeding $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Following months of launching new AI products as part of its Gemini offerings, Google showcased innovations at its recent developer conference, including a universal AI assistant capable of interacting through smart glasses. The company claims its latest Gemini AI is 20% quicker than the newest version of ChatGPT.
While Dan Ives from Wedbush expressed some reservations about the potential of AI Overviews, he noted that it could enhance Search monetization in the long run. He also emphasized that AI is currently benefiting Google Cloud, anticipating a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth affirmed a positive outlook for Google, naming it one of the firm’s leading tech stocks alongside Uber and Amazon. He expressed optimism about the company’s progress in generative AI leading up to the earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative around Google’s AI is favorable, it remains uncertain whether AI will sustainably drive sales growth for the company in the future.