Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings following market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, highlighting the positive impact of integrating the Gemini AI into Google Cloud and AI Overviews in Google Search on sales performance. They expressed confidence in AI integration across Google’s services, suggesting that broader implementation of AI overviews will likely increase user activity in the core Search business. Despite some challenges during the initial rollout of AI overviews, which attracted online humor over its inaccuracies, Post and Bansal have increased their price target for Google’s shares from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, partly attributed to its AI advancements, which led to a surge in its stock price and elevated the company’s market capitalization past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance followed a series of new AI product launches as part of its Gemini offerings. At its recent developer conference, Google I/O, the company introduced a futuristic AI assistant designed to interact with users through smart glasses, claiming it operates 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush is more cautious about the impact of AI Overviews compared to his peers, though he acknowledges its potential as a future contributor to Search monetization. He also noted that AI is already providing benefits to Google Cloud, projecting a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth also shared a positive outlook, naming Google among its top tech stock picks, alongside Uber and Amazon, stating his team’s optimism regarding the progress in generative AI in advance of Alphabet’s earnings report. On the other hand, Raymond James analyst Josh Beck cautioned that while Google’s current AI narrative is encouraging, the long-term effects on sales remain uncertain.