Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings later today.
Both Bank of America and Wedbush have upgraded their revenue projections for Google. Justin Post and Nitin Bansal from Bank of America expect that the integration of Gemini into Google Cloud and AI Overviews in Google Search will significantly boost sales.
In a recent research note, they expressed optimism regarding the momentum of AI integrations across Google’s ecosystem, noting that a wider rollout of AI Overviews could stimulate increased activity within the core Search business. This comes despite some early difficulties with AI Overviews, which attracted ridicule online for mishaps and inaccuracies. Consequently, they have adjusted their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives. This uplift contributed to a surge in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, aligning it with tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed extensive launches of new AI products under its Gemini AI brand. At the recent Google I/O developer conference, the company showcased an advanced universal AI assistant designed to interact through smart glasses. Google claims that its latest Gemini AI operates at a speed 20% faster than the current ChatGPT.
While Wedbush’s Dan Ives was more reserved about the potential of AI Overviews compared to Post and Bansil, he acknowledged in his research note that it could serve as a long-term advantage for Search monetization. He also noted that AI is already positively impacting Google Cloud, predicting a 27% revenue increase in that sector year-over-year.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic outlook, naming Google among his firm’s top tech stock picks, alongside Uber and Amazon. He mentioned that his team is encouraged by the progress in generative AI ahead of Alphabet’s second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the immediate narrative around AI for Google is positive, it remains uncertain whether this will translate into sustained long-term sales growth.