Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will provide a positive boost to its earnings for the second quarter. The parent company, Alphabet, is scheduled to release its earnings report after market hours on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections upward, noting that the integration of Google’s Gemini AI into Google Cloud and AI Overviews in Google Search is expected to enhance sales. In a recent research note, they expressed confidence in the expanding applications of AI across Google’s services, suggesting that an extensive rollout of AI Overviews could increase engagement in the core Search operations, despite earlier challenges that saw the feature mocked online for inaccuracies. They revised their target price for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, aided significantly by its AI developments, which subsequently triggered a substantial rise in its stock price, elevating the company’s market value beyond $2 trillion alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s promising performance in the first quarter followed the introduction of various AI products under its Gemini initiative. At the Google I/O developer conference, the company unveiled a futuristic universal AI assistant capable of interacting through smart glasses. Google also claims that its latest Gemini AI model operates 20% quicker than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on the impacts of AI Overviews but acknowledged the potential for these tools to contribute positively to search monetization over time. He also noted that AI is already providing a significant advantage to Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic perspective, naming Google among the firm’s top technology stocks, which also includes Uber and Amazon. He stated that the progress in generative AI is encouraging as Alphabet prepares to release its second-quarter earnings.
However, Raymond James analyst Josh Beck cautioned that while the current outlook for Google’s AI initiatives appears favorable, the long-term effects of AI on its sales growth remain uncertain.