Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, which are set to be announced after the market closes on Tuesday. Alphabet, Google’s parent company, is expected to show strong revenue growth, reflecting the integration of its Gemini AI technology into Google Cloud and enhanced AI Overviews in Google Search.
Bank of America’s analysts, Justin Post and Nitin Bansal, noted that they remain optimistic about the expanding AI applications within Google’s ecosystem and expect that a wider implementation of AI Overviews will increase engagement in the core Search business. They acknowledged initial challenges with the rollout of AI Overviews, which had received criticism for inaccuracies, but nonetheless, they raised their stock price target for Google from $200 to $206.
In its first quarter earnings report in April, Google experienced a 60% profit increase, largely attributed to its AI initiatives, resulting in its stock price climbing and pushing its market capitalization over $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance followed numerous new AI product launches, especially showcased at its Google I/O developer conference, where it introduced a next-generation AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is significantly faster than its leading competitor, ChatGPT.
While Wedbush analyst Dan Ives expressed caution about the immediate impact of AI Overviews on search monetization, he recognized the potential for these features to enhance revenue gradually. He also noted the existing positive effects of AI on Google Cloud, with expectations of a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth also expressed optimism, identifying Google as one of the top technology stocks alongside Uber and Amazon, citing encouraging developments in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is optimistic, the long-term impact on sales remains uncertain.