Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence (AI) are expected to enhance its second-quarter earnings. Google’s parent company, Alphabet, is scheduled to release its earnings report after market close on Tuesday.
According to the analysts, Bank of America’s Justin Post and Nitin Bansal, the integration of the Gemini AI into Google Cloud and new AI Overview features in Google Search are projected to boost revenue. They stated, “We remain positive on growing AI integrations across Google’s ecosystem and believe a wider rollout of AI Overviews will contribute to increased activity in the core Search business,” in a recent research note. This comes despite some initial issues with AI Overviews, which faced criticism for errors and inaccuracies. As a result, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, partially attributed to its AI initiatives. Following this announcement, the company’s stock surged, elevating its market capitalization beyond $2 trillion, placing it among tech giants like Apple, Microsoft, and Nvidia.
Google’s success in the first quarter followed months of the rollout of new AI products as part of its Gemini AI strategy. Notable announcements during the Google I/O developer conference included an ambitious universal AI assistant that could perceive and communicate through smart glasses. Google has claimed that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the long-term impact of AI Overviews compared to Post and Bansal, he acknowledged that it “may become a tailwind for Search monetization over time.” He also noted that AI is already having a positive effect on Google Cloud and expects a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a positive outlook, naming Google among its top technology stocks (alongside Uber and Amazon) and indicated optimism about the progress in Generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI is favorable, its long-term impact on Google’s sales remains uncertain.