Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings, with Alphabet set to announce its earnings after the market close on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have revised their revenue projections for Google, citing the integration of Gemini into Google Cloud and AI Overviews within Google Search as key drivers of increased sales.
They expressed optimism about the growing integration of AI across Google’s ecosystem, believing that a more extensive rollout of AI Overviews could stimulate more activity in the fundamental Search business. This was detailed in a research note released last week, despite some initial issues with the tool that led to online ridicule due to errors and inaccuracies. As a result of these updated forecasts, the analysts raised their target price for Google’s stock from $200 to $206.
In its April earnings report, Google announced a remarkable 60% surge in profits for the first quarter, attributed in part to AI developments. The positive results led to a significant increase in its stock price, pushing its market valuation beyond $2 trillion, positioning it alongside Apple, Microsoft, and Nvidia.
This robust financial performance followed months of launching new AI products as part of its Gemini AI initiatives. Highlights from the recent Google I/O developer conference included an advanced universal AI assistant designed to interact through a user’s smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
Dan Ives from Wedbush, while more cautious about the potential of AI Overviews, noted in a Monday research note that it might serve as a supportive factor for Search monetization over time. He also pointed out that AI is already contributing positively to Google Cloud, with many analysts, including Ives, anticipating a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth shared similar optimistic views, recently naming Google one of the firm’s top tech stock picks alongside Uber and Amazon, highlighting encouragement from the advancements in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that the current positive outlook on AI’s influence on Google remains uncertain, particularly regarding its long-term potential to drive sales increases.