Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have raised their revenue projections for Google. According to analysts Justin Post and Nitin Bansal, the company’s integration of its Gemini AI system into Google Cloud and AI Overviews in Google Search is likely to boost sales figures.
In their research note, they expressed optimism about the growing utilization of AI across Google’s platforms, mentioning that a wider deployment of AI overviews could stimulate increased activity within the core Search business. This came even after some initial issues with AI overviews produced humorous and inaccurate outputs. Consequently, Post and Bansal have adjusted their price forecast for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, largely attributing this growth to AI, and its stock price subsequently climbed, elevating its market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was supported by a series of AI product releases, especially from its Gemini AI initiative. During its recent developer conference, Google I/O, it unveiled a universal AI assistant designed to interact with users through smart glasses. Google asserts that its latest Gemini AI operates 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives is slightly more cautious about the potential impact of AI Overviews, he acknowledged that they could eventually become a supportive factor for Search monetization. He also noted that AI is already benefiting Google Cloud, with expectations of a 27% revenue increase from the previous year.
Doug Anmuth from J.P. Morgan shared a similar positive outlook, identifying Google as one of the firm’s top tech stock picks alongside Uber and Amazon. He expressed encouragement regarding the progress in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current sentiment surrounding Google’s AI potential is favorable, the long-term effects of AI on Google’s sales remain uncertain.