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, as Alphabet prepares to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, citing the integration of Gemini into Google Cloud and AI Overviews in Google Search as major sales catalysts. They expressed optimism about the growing AI features across Google’s platform, suggesting that a wider deployment of AI Overviews could significantly increase activity within the core Search segment. Despite some challenges during the initial rollout of AI Overviews, where the tool faced criticism for errors, they increased Google’s stock price target from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, thanks in part to its AI innovations, which also helped its stock price rise and pushed its market valuation above $2 trillion, joining prestigious company with Apple, Microsoft, and Nvidia.
Google’s impressive performance in the first quarter followed numerous new product releases centered around its Gemini AI initiative. Notable announcements from the recent Google I/O developer conference included a futuristic universal AI assistant capable of interacting through a user’s smart glasses, with claims that the latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives is less enthusiastic about the immediate impact of AI Overviews, he acknowledged its potential to support Search monetization over time. He also mentioned that AI is already benefiting Google Cloud, with expectations of a 27% revenue increase in this sector compared to last year.
Doug Anmuth from J.P. Morgan also conveyed a positive outlook, naming Google as one of their top tech stock picks alongside Uber and Amazon, and expressed encouragement regarding the progress in Generative AI ahead of the earnings report. Conversely, analyst Josh Beck from Raymond James cautioned that, although the present narrative surrounding AI for Google is favorable, the long-term implications for sales growth remain uncertain.