Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this to the successful integration of its Gemini AI into Google Cloud and the AI Overviews feature in Google Search. They expressed optimism about these AI developments, stating that a wider implementation of AI overviews could drive increased interaction in Google’s core Search business, despite some initial challenges faced during its rollout. They have raised their price target for Google’s stock from $200 to $206.
In April, Google reported an impressive 60% rise in profits in the first quarter, significantly aided by its AI initiatives, which resulted in a dramatic increase in its stock price, elevating its market capitalization beyond $2 trillion, joining industry giants Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results came on the heels of extensive launches of new AI products under its Gemini brand. Notable announcements from the recent Google I/O developer conference included a future AI assistant that could interact through smart glasses. Google claims its latest Gemini AI is 20% faster than the newest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews, suggesting it might contribute positively to Search monetization in the future. He also noted that AI is currently benefiting Google Cloud, forecasting a 27% year-over-year increase in Cloud revenue.
Doug Anmuth from J.P. Morgan also highlighted Google’s positive prospects, naming it among the firm’s top tech stock recommendations, alongside Uber and Amazon, while expressing excitement about the progress in generative AI as Alphabet prepares for its second-quarter earnings report.
However, Josh Beck from Raymond James cautioned that, while the current narrative around Google’s AI is favorable, the long-term impact on its sales remains uncertain.