Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence could significantly enhance its second-quarter earnings. The parent company, Alphabet, is expected to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, citing the company’s integration of Gemini in Google Cloud and AI Overviews in Google Search as key sales drivers. They expressed optimism about the ongoing AI integrations within Google’s ecosystem, believing that the broad deployment of AI Overviews will encourage greater user engagement in the core Search service. Despite some initial challenges and humorous missteps during the rollout of AI Overviews, they have increased their price target for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% profit increase in the first quarter, largely attributed to its AI initiatives. This surge led to a significant rise in its stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter followed the introduction of multiple new AI products as part of the Gemini AI offerings. Among these was a universal AI assistant showcased at the Google I/O developer conference, which is designed to interact through a user’s smart glasses. Google claims this latest iteration of Gemini AI operates 20% faster than the latest ChatGPT.
While Wedbush analyst Dan Ives is slightly less optimistic about the AI Overviews than Post and Bansal, he acknowledged that it could serve as a beneficial factor for Search monetization in the long run. He also noted that AI is already contributing positively to Google Cloud, with expectations of a 27% revenue increase in that sector compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similarly positive outlook, naming Google as one of his firm’s top technology stock picks, along with Uber and Amazon, citing encouraging developments in generative AI as they approach Alphabet’s second-quarter earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, the long-term impact of AI on sales remains uncertain.