Google’s advancements in artificial intelligence are expected to enhance its earnings for the second quarter, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, will announce its earnings on Tuesday after market hours.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have upgraded their revenue projections for Google, citing the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search as key drivers for increased sales.
In a recent research note, they expressed optimism about the growing AI integrations within Google’s ecosystem, believing that an expanded implementation of AI overviews could elevate engagement in the core Search business. This positive outlook persists despite initial challenges during the rollout of AI overviews, which drew scrutiny for errors and inaccuracies. Their target price for Google’s stock has been raised from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly influenced by its AI initiatives. This led to a surge in its stock price, pushing its market capitalization beyond $2 trillion, aligning it with major players like Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results followed extensive releases of new AI products as part of its Gemini offerings. Highlights from its recent Google I/O conference included a universal AI assistant capable of interacting through smart glasses, and Google asserts that its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to Post and Bansal, he indicated that these features could eventually benefit Search monetization. Ives noted that AI is already fueling growth in Google Cloud, and analysts generally expect a 27% rise in Cloud revenue compared to last year.
Similarly, J.P. Morgan’s Doug Anmuth shared a positive viewpoint, placing Google among their top tech stock recommendations, alongside Uber and Amazon. He expressed encouragement regarding the progress in Generative AI ahead of Alphabet’s second-quarter earnings report.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative around Google’s AI is optimistic, its long-term impact on sales remains uncertain.