Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will contribute positively to its earnings for the second quarter, with Alphabet set to announce its results on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, attributing the potential growth to the integration of Gemini into Google Cloud and AI Overviews in Google Search. They expressed optimism that a wider rollout of AI overviews will enhance user engagement within the Search segment.
Despite some initial challenges with the AI overviews, which faced online criticism for inaccuracies, Post and Bansal 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, significantly aided by its AI initiatives, which drove the stock price up and elevated the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter came on the heels of several AI product launches as part of Google’s Gemini AI. Notable features introduced at the Google I/O developer conference included a future AI assistant capable of interacting through smart glasses, with Google claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view regarding the immediate impact of AI Overviews, he noted their potential to support Search monetization in the long run. Ives also highlighted the positive impact of AI on Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a favorable outlook, listing Google as one of the top tech stocks alongside Uber and Amazon, and noted the encouraging developments in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI is optimistic, the long-term effects on Google’s sales performance remain uncertain.