Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s AI initiatives will enhance its earnings report for the second quarter, with Alphabet scheduled to disclose its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have improved their revenue projections for Google, attributing the expected increase to the integration of the Gemini AI into Google Cloud and AI features in Google Search. They noted in a recent research report that the ongoing implementation of AI across Google’s platforms is likely to boost user engagement in its core Search business, despite some initial challenges with the AI overviews feature which faced criticism for inaccuracies. As a result, they raised their price target for Google’s stock from $200 to $206.
In an impressive first quarter reported in April, Google experienced a 60% surge in profits, significantly influenced by its AI developments, leading to a notable increase in its stock value and propelling its market capitalization beyond $2 trillion, joining peers like Apple, Microsoft, and Nvidia.
Google’s strong performance comes after months of introducing new AI products as part of its Gemini initiative. Notable announcements at the Google I/O developer conference included a futuristic universal AI assistant capable of interacting through a user’s smart glasses, with Google claiming that its latest Gemini AI operates 20% faster than the newest version of ChatGPT.
While Dan Ives of Wedbush expressed a more cautious outlook regarding AI Overviews, he emphasized the potential of AI to bolster Search monetization in the long run. He also noted AI’s current positive effect on Google Cloud, predicting a 27% rise in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan shared the optimistic outlook, listing Google among the firm’s top tech stock picks along with Uber and Amazon. He conveyed confidence in the advancements made in Generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Josh Beck of Raymond James cautioned that while the current AI narrative surrounding Google is encouraging, the long-term impact of AI on increasing sales remains uncertain.