Analysts at Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report on Tuesday after market close.
Bank of America analysts Justin Post and Nitin Bansal have elevated their revenue projections for Google, attributing this to the integration of the Gemini AI technology into Google Cloud and the implementation of AI Overviews in Google Search, which are expected to increase sales.
In a recent research note, Post and Bansal expressed optimism about the expanding AI features within Google’s ecosystem, predicting that a wider adoption of AI overviews could lead to greater user engagement in its core Search business. This is in spite of some initial challenges during the rollout of AI overviews, which faced criticism for occasional errors. They have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely driven by its AI initiatives, leading to a surge in its stock price and pushing its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The surge in performance follows the launch of various artificial intelligence products under the Gemini umbrella. Notable among these is an AI assistant showcased at the Google I/O developer conference that aims to interact visually and conversationally through smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives is less optimistic about the immediate impact of AI Overviews, he noted that it could eventually support revenue growth in Search. He also stated that AI is already having a positive effect on Google Cloud, aligning with other analysts’ expectations of a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared the upbeat outlook and recognized Google as one of the firm’s top tech investment picks, along with Uber and Amazon, reflecting optimism about the advancements in generative AI prior to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative around Google appears favorable, the long-term impact on sales remains uncertain.