Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence (AI) will enhance its earnings for the second quarter, as the company prepares to announce its earnings report after the market closes on Tuesday.
Both Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, attributing this to the integration of its AI tool, Gemini, into Google Cloud, as well as the introduction of AI Overviews in Google Search, which they anticipate will lead to increased sales. They expressed their confidence in expanding AI applications across Google’s ecosystem, asserting that a broader deployment of AI Overviews could stimulate greater engagement in Google’s primary Search business. Despite some initial setbacks during the rollout of AI Overviews, which led to some humorous online reactions due to errors, the analysts raised their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a remarkable 60% increase in profits, driven in part by its AI innovations, leading to a significant surge in its stock price and elevating its market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The company has released a series of new AI products in recent months, particularly with its Gemini AI lineup. Among the highlights from its recent developer conference, Google I/O, was the introduction of a futuristic AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI is 20% faster than the current version of ChatGPT.
While Dan Ives of Wedbush is less optimistic about AI Overviews than his peers, he noted that this feature could positively influence Search monetization over time. He also highlighted that AI is already enhancing Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similarly optimistic outlook and included Google among the firm’s top tech stock recommendations, alongside Uber and Amazon, noting encouragement from the progress in Generative AI as they anticipate Alphabet’s upcoming second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding Google’s AI is favorable, the long-term impact of AI on Google’s sales remains uncertain.