Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance its earnings for the second quarter. Parent company Alphabet is scheduled to release its earnings report on Tuesday.
According to analysts from Bank of America, including Justin Post and Nitin Bansal, the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search are expected to significantly boost the company’s revenue. In a research note, they expressed optimism about AI’s integration across Google’s platforms, stating that the broader rollout of AI Overviews could increase activity in the core Search business, despite some issues with the initial launch that led to humorous internet responses due to errors in the tool. As a result of these positive outlooks, they have adjusted their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits in the first quarter, attributed in part to its AI initiatives, which drove the stock price upward and increased the company’s market capitalization to over $2 trillion, joining peers like Apple, Microsoft, and Nvidia.
Following several months of AI product launches related to its Gemini offerings, Google’s performance has been buoyed. Notable announcements at its recent Google I/O developer conference included an enhanced AI assistant capable of interacting through smart glasses. Google claims this latest version of Gemini AI is 20% faster than the latest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the impact of AI Overviews on long-term search monetization, he acknowledged that AI is already having a positive effect on Google Cloud. He anticipates a 27% growth in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, highlighting Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, and expressing confidence in the progress of generative AI ahead of Alphabet’s second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that, while the current AI developments are promising for Google, the long-term implications for sales growth remain uncertain.