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 trading ends on Tuesday.
The revenue outlook for Google has been increased by both Bank of America and Wedbush analysts. Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI into Google Cloud, along with AI Overviews in Google Search, will drive sales growth.
In a recent research note, the analysts expressed optimism about the expanding AI integrations within Google’s ecosystem, stating that a broader rollout of AI overviews is likely to boost activity in its core Search business. This comes despite early challenges during the rollout of AI overviews, which attracted humor for producing errors and inaccuracies. Post and Bansal have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly attributed to its AI initiatives. This impressive performance led to a surge in its stock price, pushing its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed months of launching new AI products under its Gemini AI offerings. Notable announcements at its Google I/O developer conference included a universal AI assistant that could interact through a user’s smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives had a more cautious view of AI Overviews compared to Post and Bansal, he noted in a Monday research note that these features “may become a tailwind for Search monetization over time.” He also highlighted that AI is already enhancing Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth echoed these positive sentiments, naming Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing optimism about the progress in Generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current positive narrative surrounding Google’s AI, it remains to be seen whether AI will have a lasting impact on the company’s sales in the long run.