Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to boost its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report following market close on Tuesday.
Both Bank of America and Wedbush have increased their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America note that the incorporation of Gemini into Google Cloud and AI Overviews in Google Search is likely to enhance sales.
“We maintain a positive outlook on the growing AI integrations throughout Google’s ecosystem and anticipate that a wider deployment of AI overviews will stimulate higher engagement in the core Search business,” they mentioned in a research note last week, despite some initial hiccups in the rollout of AI overviews that garnered internet ridicule due to errors. They have also raised their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, aided by its AI initiatives, which resulted in a significant rise in its stock price and pushed its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results came on the heels of its Gemini AI product launches over previous months. During its Google I/O developer conference, the company unveiled a futuristic AI assistant capable of interacting through users’ smart glasses, claiming that its latest Gemini AI functions 20% faster than the most recent ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the potential of AI Overviews compared to Post and Bansal, he noted in a research note that it could become a beneficial factor for Search monetization over time. Additionally, he pointed out that AI is already contributing positively to Google Cloud and predicts a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth reaffirmed the optimistic outlook, designating Google as one of the firm’s top tech stock picks, alongside Uber and Amazon, citing excitement about the advancements in generative AI ahead of Alphabet’s upcoming earnings report.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current AI narrative surrounding Google is encouraging, it remains uncertain whether AI will significantly drive long-term sales growth for the company.