Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue projections for Google, attributing the expected growth to the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search. They noted that the rollout of AI overviews is likely to enhance user activity in Google’s core Search business despite initial challenges, which led to some humorous feedback on social media due to production errors. Consequently, they adjusted their price target for Google stock from $200 to $206.
In its first-quarter report earlier this year, Google experienced a remarkable 60% increase in profits, significantly aided by AI innovations. This surge also led to a rise in the company’s stock price, elevating its market capitalization to over $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed a series of AI product launches, notably its Gemini AI suite. A highlight from the recent Google I/O conference was an AI assistant capable of recognizing and conversing through smart glasses, with Google claiming that the latest version of Gemini AI operates 20% faster than the latest ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding AI Overviews’ impact on Search monetization, he acknowledged the ongoing benefits of AI in boosting Google Cloud services. Market consensus among analysts, including Ives, predicts a 27% increase in Google Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared a positive outlook, identifying Google as one of the firm’s top technology stock picks, alongside Uber and Amazon, and expressed optimism about the progress in generative AI in advance of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the narrative around AI’s role in Google’s success is currently favorable, its long-term impact on sales remains uncertain.