Analysts from Wedbush, J.P. Morgan, and Bank of America expect Google’s AI advancements to positively impact its second-quarter earnings. The parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush have revised their revenue projections for Google upwards. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that the integration of the Gemini AI platform into Google Cloud and the AI Overviews feature in Google Search will enhance sales.
In a research note released last week, they expressed optimism regarding the ongoing incorporation of AI throughout Google’s services, suggesting that a wider deployment of AI overviews could elevate user engagement in the core Search business. This optimism persists despite initial challenges with AI overviews, which faced criticism online for producing inaccuracies. Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge for the first quarter, significantly bolstered by its AI initiatives. Following this news, the company’s stock price soared, pushing its market capitalization beyond $2 trillion, joining the ranks of tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance was fueled by numerous launches of new AI products under the Gemini branding. At its recent developer conference, Google I/O, the company unveiled an innovative universal AI assistant capable of interacting through smart glasses. Google asserts that its latest Gemini AI system is 20% faster than the newest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on AI Overviews in his Monday note, he acknowledged that over time, it could benefit Search monetization. Ives also noted that AI is already enhancing Google Cloud services, with analysts predicting a 27% year-over-year rise in Cloud revenue.
J.P. Morgan analyst Doug Anmuth mirrored this optimism, naming Google as one of the investment firm’s top tech stock picks alongside Uber and Amazon, highlighting his team’s excitement about advancements in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the present positive narrative surrounding AI at Google, it remains uncertain whether these technologies will lead to sustained long-term sales growth.