Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact the company’s second-quarter earnings. Parent company Alphabet is set to release its earnings report on Tuesday after market close.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue expectations for Google. They believe the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search will enhance sales. In a research note, they expressed optimism about the increasing AI applications within Google’s ecosystem and suggested that a broader rollout of AI Overviews is likely to encourage greater activity in the core Search business, despite initial challenges with the tool, which faced criticism online for producing errors. They also revised their price target for Google’s stock up from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, aided by its AI initiatives, which propelled the company’s stock price and market capitalization above $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the previous quarter can be linked to several new AI products introduced as part of its Gemini AI lineup. During the Google I/O developer conference in April, the company unveiled a futuristic universal AI assistant capable of interacting through a user’s smart glasses. Google claims its latest Gemini AI outperforms the newest ChatGPT by being 20% faster.
While Wedbush’s Dan Ives expressed a more conservative stance regarding AI Overviews, he noted their potential to benefit Search revenue over time. He also mentioned that AI has already been advantageous for Google Cloud, estimating a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth joined in the positive outlook, naming Google among their top tech stock recommendations alongside Uber and Amazon, highlighting encouragement from the progress of generative AI as Alphabet prepares for its upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the favorable current narrative for Google’s AI, the long-term impact on sales remains uncertain.