Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is set to release its earnings report on Tuesday.
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Bank of America analysts, Justin Post and Nitin Bansal, have upgraded their revenue projections for Google, citing the integration of the Gemini AI into Google Cloud and an increase in AI overviews in Google Search as key factors for growth. They expressed optimism about the potential of AI features driving more engagement in Google’s core search business, despite some initial setbacks where the AI overviews garnered criticism for inaccuracies. Consequently, they revised their stock price target for Google from $200 to $206.
In April, Google announced a remarkable 60% surge in profits for the first quarter, attributed mainly to its AI developments, which propelled its stock price and market capitalization to exceed $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
The outstanding performance in the first quarter was supported by the launch of various AI products under the Gemini brand during recent months, including an innovative AI assistant unveiled at the Google I/O developer conference, which aims to interact through smart glasses. Google claims its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives was slightly more reserved about the immediate benefits of AI Overviews than his counterparts, he noted that in the long run, it could contribute positively to Search monetization. He also highlighted that AI is already having a favorable impact on Google Cloud, forecasting a 27% year-on-year increase in Cloud revenue.
J.P. Morgan’s analyst Doug Anmuth reinforced this optimistic outlook, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon, and mentioned enthusiasm over advancements in generative AI as Alphabet prepares for its second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is positive, the long-term impact on Google’s sales remains uncertain.