According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings following the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue expectations for Google, attributing the anticipated boost in sales to the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search. They expressed optimism about Google’s expanding use of AI across its services, predicting that the broader implementation of AI overviews will enhance user engagement in the core Search business. This comes despite early issues with the AI overview tool, which faced ridicule online for some inaccuracies. As a result, they adjusted their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by AI contributions, which increased its stock value and pushed the company’s market capitalization beyond the $2 trillion milestone, joining the ranks of Apple, Microsoft, and Nvidia.
The strong first-quarter results were bolstered by a series of AI product launches in recent months, including significant announcements from the Google I/O developer conference, where the company introduced vision and voice capabilities for a future AI assistant via smart glasses. Google claims that its latest Gemini AI operates at 20% faster speeds compared to the newest version of ChatGPT.
While Wedbush’s Dan Ives took a slightly more cautious stance on the AI Overviews, noting they might support search monetization over time, he acknowledged that AI is already benefiting Google Cloud. He, along with other analysts on Wall Street, anticipates a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared the positive outlook, naming Google as one of their top tech stock picks along with Uber and Amazon, and expressed optimism about the progress in generative AI ahead of Alphabet’s earnings announcement.
Despite the encouraging current narrative surrounding AI at Google, Raymond James analyst Josh Beck cautioned that the long-term impact of AI on driving Google’s sales remains uncertain.