Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence could enhance its earnings for the second quarter. Google’s parent company, Alphabet, is scheduled to disclose its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, crediting the company’s integration of its Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search for this optimism. They noted in a recent research note that they remain positive about the expansion of AI features across Google’s platform, believing that a broader deployment of AI overviews will likely increase activity in the primary Search segment. This comes despite some initial issues with the AI Overviews, which faced criticism for inaccuracies. The analysts have also adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, which was partially fueled by AI developments. This performance led to a significant rise in its stock price, elevating the company’s market value past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive financial results followed a series of new artificial intelligence solutions introduced as part of Google’s Gemini AI initiatives. Recent innovations showcased at the Google I/O developer conference included a universal AI assistant designed to interact with users through smart glasses. Google asserts that its latest Gemini AI is 20% more efficient than the most recent version of ChatGPT.
Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews than his counterparts but noted in a Monday report that this feature could become beneficial for Search monetization over time. Ives also highlighted that AI is already having a positive impact on Google Cloud, with expectations of a 27% revenue increase in that area compared to last year.
Doug Anmuth from J.P. Morgan echoed the positive outlook, naming Google among its top tech stock picks alongside Uber and Amazon. He expressed encouragement over the progress of generative AI leading up to Alphabet’s forthcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI initiatives is favorable, its long-term impact on driving sales remains uncertain.