Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI initiatives may enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have optimistic revenue projections for Google, attributing this to the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search, which they believe will boost sales.
In a research note, they expressed their confidence in the growing integration of AI throughout Google’s ecosystem and suggested that the wider rollout of AI Overviews could increase activity in the core Search business. This optimism comes despite some initial challenges with the AI Overviews, which drew criticism online for inaccuracies. Post and Bansal also raised their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% profit increase for the first quarter, largely credited to AI advancements, leading to a surge in its stock price and a market capitalization surpassing $2 trillion, placing it alongside tech giants Apple, Microsoft, and Nvidia.
The company’s strong performance was bolstered by months of introducing new AI products within its Gemini offerings. At the recent Google I/O developer conference, Google unveiled plans for a universal AI assistant designed to operate through smart glasses, claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives of Wedbush expressed some reservations about the immediate impact of AI Overviews, he indicated that they could potentially benefit Search monetization in the long run. Ives noted that AI is already positively influencing Google Cloud, with expectations of a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan reiterated the favorable outlook, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon, and expressing optimism for the progress in generative AI ahead of Alphabet’s second-quarter earnings announcement.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current narrative surrounding Google’s AI is optimistic, it remains to be seen whether AI will sustainably boost Google’s sales in the long run.