Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI advancements will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Following a partnership with Uber for delivery services, shares of Darden Restaurants have surged. Bank of America and Wedbush have both increased their revenue projections for Google, with Bank of America’s Justin Post and Nitin Bansal noting that the integration of Gemini into Google Cloud and AI Overviews in Google Search is likely to boost sales.
In a recent research note, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” They also adjusted their price target for Google’s stock from $200 to $206, despite some early issues with AI Overviews that had drawn online criticism for errors and misleading outputs.
Google reported a remarkable 60% profit increase for the first quarter of the year, largely driven by its AI initiatives, resulting in a surge in its stock price and pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The positive performance in Q1 was attributed to the rollout of new AI products related to its Gemini AI offerings. Recent announcements from the Google I/O developer conference included an advanced AI assistant capable of interacting through smart glasses. Google has claimed its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view regarding AI Overviews compared to Post and Bansal, he mentioned that it has the potential to support Search monetization in the long run. Ives also noted that AI is already making a positive impact on Google Cloud, anticipating a 27% revenue increase from this sector compared to the previous year.
J.P. Morgan’s Doug Anmuth mirrored the optimistic outlook, naming Google among its top technology stock picks, along with Uber and Amazon, as his team remains excited about the progress in generative AI prior to Alphabet’s impending second-quarter earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current AI developments at Google are promising, the long-term impact on sales remains uncertain.