Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue expectations for Google, citing the integration of AI features, specifically Gemini, into Google Cloud and Search. They expressed optimism about the potential of AI overviews to increase engagement in Google’s Search services, despite some initial challenges that resulted in humorous online reactions to the tool’s errors. Consequently, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely credited to its AI initiatives, leading to a surge in its stock price that propelled the company’s market valuation above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This strong performance followed a series of new AI product launches, particularly through its Gemini AI offerings. Notably, during the Google I/O developer conference, the company unveiled a futuristic universal AI assistant capable of interacting via smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious outlook regarding AI Overviews compared to Post and Bansal, he acknowledged their potential benefit for Search monetization in the long run. He emphasized that AI is already contributing positively to Google Cloud, predicting a 27% increase in Cloud revenues year-over-year.
J.P. Morgan’s Doug Anmuth also expressed optimism, identifying Google as one of his firm’s top technology stock picks alongside Uber and Amazon, and indicating a favorable outlook on AI developments ahead of the earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is positive, its long-term impact on sales remains uncertain.