Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s investments in artificial intelligence will have a positive impact on its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings on Tuesday after the market closes.
Both Bank of America and Wedbush have increased their revenue projections for Google. Analysts Justin Post and Nitin Bansal believe that the company’s deployment of Gemini within Google Cloud and the introduction of AI Overviews in Google Search are likely to enhance sales.
In a recent research note, they expressed optimism about the expanding AI applications throughout Google’s ecosystem, suggesting that a wider implementation of AI Overviews could lead to increased activity in the core Search business. This comes despite some initial challenges with the AI Overviews, which gained attention online for producing errors. Post and Bansal adjusted their price target for Google’s stock, raising it from $200 to $206.
In April, Google had reported a remarkable 60% increase in profits during the first quarter, fueled in part by AI advancements. Consequently, its stock surged, elevating the company’s market capitalization to over $2 trillion, placing it among the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed several new AI product launches, including its Gemini AI enhancements. During its recent developer conference, Google I/O, the company introduced a universal AI assistant capable of functioning through smart glasses. Google claims its latest Gemini AI performs 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives holds a more cautious view on AI Overviews, suggesting they could aid in Search monetization in the long run, he acknowledges the positive impact AI is already having on Google Cloud revenue. Other analysts share the sentiment that Google is expected to report a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also expressed optimism, labeling Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and showing excitement about the progress in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI efforts is encouraging, the long-term effects on sales remain uncertain.