Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet set to report its earnings after the market closes on Tuesday.
According to Bank of America’s Justin Post and Nitin Bansal, the integration of Gemini into Google Cloud and AI Overviews in Google Search is expected to drive revenue growth. They stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business,” despite earlier issues with the AI overview tools, which faced criticism for inaccuracies. Their price target for Google’s stock has been raised from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This surge resulted in the company’s stock price climbing, pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following the launch of several new artificial intelligence products under its Gemini AI initiatives, Google’s first-quarter success included a major unveiling at its Google I/O developer conference, showcasing a universal AI assistant that can interact through smart glasses. Google asserts that its latest Gemini AI model is 20% more efficient than the latest ChatGPT versions.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews than his peers, he noted their potential for positive impact on Search monetization in the future. He also pointed out that AI is already benefiting Google Cloud, projecting a 27% increase in Cloud revenue year-over-year, similar to other analysts’ predictions.
J.P. Morgan’s Doug Anmuth shared a positive outlook by naming Google among its top technology stock picks alongside Uber and Amazon, emphasizing optimism regarding progress in Generative AI leading up to Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI trends for Google are promising, the long-term impact on sales remains uncertain.