Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. Alphabet, Google’s parent company, is expected to announce its earnings after the market closes on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the incorporation of Gemini into Google Cloud and enhanced AI features in Google Search will lead to increased sales. They expressed confidence in the benefits of the AI integrations across Google’s platforms, predicting that broader implementation of AI overviews will stimulate higher user engagement in Google Search. Despite some initial setbacks where the AI tool was humorously critiqued for inaccuracies, they remain positive and have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, attributed in part to its AI initiatives, which also boosted its stock price and market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed months of AI product launches under its Gemini program. Notable announcements made at the recent Google I/O developer conference included an innovative AI assistant designed to interact through smart glasses. Google claims its latest Gemini AI model is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, suggesting they might take time to enhance Search monetization, he acknowledged the positive impact of AI on Google Cloud revenue. He, along with other analysts, anticipates a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth also shared a favorable outlook, designating Google as one of the firm’s top technology stocks, alongside Uber and Amazon. He expressed enthusiasm about the advancements in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that despite the current optimism surrounding AI’s impact on Google’s performance, the long-term effects on sales remain uncertain.