Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will contribute positively to its second-quarter earnings report, scheduled to be released after the market closes on Tuesday. Google’s parent company, Alphabet, is expected to showcase significant growth spurred by its AI initiatives.
According to Bank of America’s analysts, Justin Post and Nitin Bansal, the incorporation of the Gemini AI system into Google Cloud and the introduction of AI Overviews in Google Search are projected to enhance revenue. They expressed confidence that the broader application of AI features will lead to increased user engagement in Google Search, despite some earlier challenges with the AI Overviews’ rollout, which had drawn negative attention online for its inaccuracies. Consequently, they have raised their price target for Google’s stock from $200 to $206.
In the first quarter, Google reported a notable profit surge of 60%, largely attributed to AI developments, which propelled its stock price and pushed its market capitalization beyond the $2 trillion milestone, positioning it alongside industry giants like Apple, Microsoft, and Nvidia.
The recent Google I/O developer conference unveiled several promising AI products, including a forward-looking AI assistant designed to interact through smart glasses. Google claims that its Gemini AI operates 20% faster than the latest ChatGPT iteration.
On the other hand, while Wedbush’s Dan Ives remains cautiously optimistic about AI Overviews, noting its potential to support Search monetization in the long term, he agrees that AI is already making a positive impact on Google Cloud, predicting a 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth also shares a positive outlook on Google and has highlighted it as one of its preferred tech stocks alongside Uber and Amazon, noting confidence in ongoing advancements in generative AI.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative around Google, it remains to be seen whether these innovations will sustain long-term revenue growth.
In summary, the prevailing sentiment among analysts is that Google’s AI developments hold the potential for significant impact on its financial health, particularly as it relates to its Cloud services and core Search business. As the company prepares to release its earnings report, investors remain hopeful that these innovations will continue to pay dividends in the near future. This positive perspective bolsters the narrative of technological advancement driving market success.