Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its earnings for the second quarter. Google’s parent company, Alphabet, is set to release its earnings report on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have raised their revenue predictions for Google, highlighting the positive impact of the integration of Gemini into Google Cloud and AI Overviews in Google Search on sales figures. They expressed optimism about the growing implementation of AI across Google’s services, noting that a more extensive rollout of AI overviews could stimulate activity in the company’s core Search business. Despite a rocky start for AI overviews, which faced hiccups in its initial launch, the analysts increased their stock price target for Google from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, driven in part by AI advancements. This financial boost led to a significant rise in the company’s stock price, helping it reach a market capitalization exceeding $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches under the Gemini AI brand. At its recent developer conference, Google I/O, the company unveiled a futuristic universal AI assistant capable of interacting with users through smart glasses. Google claims that its latest Gemini AI product is 20% faster than the current version of ChatGPT.
While Wedbush’s Dan Ives expressed a cautious outlook on AI Overviews, stating it could eventually aid in Search monetization, he acknowledged that AI is already contributing positively to Google Cloud. Ives and other analysts anticipate a 27% growth in Cloud revenue year-over-year for Google.
J.P. Morgan’s Doug Anmuth echoed the optimistic sentiment, identifying Google as one of the investment firm’s top technology stocks along with Uber and Amazon, citing progress in Generative AI as a positive indicator ahead of Alphabet’s second-quarter report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is favorable, it remains uncertain whether AI will lead to long-term sales growth for the company.