Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its earnings for the second quarter. Google parent company Alphabet is expected to release its earnings after the market closes on Tuesday.
Bank of America and Wedbush have raised their revenue projections for Google, with analysts Justin Post and Nitin Bansal highlighting the potential boosts from the integration of Gemini into Google Cloud and the new AI Overviews feature in Google Search. In a recent research note, they expressed optimism about the broader AI capabilities improving user engagement in Search, despite some initial challenges with the AI Overviews that attracted ridicule online due to errors and inaccuracies. As a result, they increased their price target for Google’s stock from $200 to $206.
Following a 60% profit surge in the first quarter attributed to AI initiatives, Google saw its stock price soar, pushing its market valuation above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive momentum comes after several AI product launches, particularly during Google’s recent developer conference, where the company introduced a universal AI assistant envisioned to interact through smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed a slightly more cautious outlook on AI Overviews, he suggested it could eventually benefit Search monetization. He also noted that AI is already enhancing Google Cloud’s performance, anticipating a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, identifying Google as one of the investment firm’s top tech picks, alongside Uber and Amazon, and expressed enthusiasm about advancements in generative AI prior to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative is encouraging, the long-term impacts of AI on Google’s sales remain uncertain.