Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence (AI) will positively influence its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, highlighting the impact of integrating the Gemini AI platform into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales. Despite some initial challenges with AI Overviews, which faced criticism for inaccuracies, they remain optimistic about Google’s AI developments. Consequently, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, attributed in part to its AI initiatives, which led to a surge in its stock price and a market capitalization exceeding $2 trillion, placing it among industry giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter followed the release of multiple AI tools as part of its Gemini series. Notably, during the Google I/O developer conference, the company unveiled a cutting-edge AI assistant that can interact through smart glasses. Google asserts that its Gemini AI is 20% faster than the latest version of ChatGPT.
While analyst Dan Ives of Wedbush expressed caution regarding the potential of AI Overviews to significantly boost Google’s Search monetization, he acknowledged that AI is already having a positive effect on Google Cloud. He forecasts a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan endorsed Google as one of their top tech stock recommendations, alongside Uber and Amazon, indicating that he and his team are optimistic about the advancements in generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that even though the current sentiment surrounding Google’s AI performance is favorable, the long-term impact on sales remains uncertain.