Analysts at Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is poised to announce its earnings report after the markets close this Tuesday.
According to Bank of America analysts Justin Post and Nitin Bansal, the integration of the Gemini AI platform into Google Cloud and the AI Overviews feature within Google Search is expected to increase sales. They maintained a positive outlook on the expanding AI capabilities across Google’s ecosystem, suggesting that a wider implementation of AI Overviews would likely enhance activity in the core Search business. Despite some complications during the initial rollout of AI Overviews, which faced criticism online for inaccuracies, they have raised their price target for Google shares from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to AI contributions, which led to a surge in its stock price and elevated the company’s market capitalization beyond $2 trillion, placing it alongside major tech firms like Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results came on the heels of multiple releases in artificial intelligence products as part of its Gemini offerings. The company showcased its latest innovations at the Google I/O developer conference, including a futuristic universal AI assistant designed to interact through smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious stance on the long-term potential of AI Overviews compared to Post and Bansal, he noted that it could support monetization in Search over time. He also indicated that AI is already benefiting Google Cloud, with expectations of a 27% revenue increase from the previous year, aligning with views from other analysts.
J.P. Morgan analyst Doug Anmuth shared a similarly optimistic perspective, identifying Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI in anticipation of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative surrounding Google is positive, the long-term impact of AI on the company’s sales remains uncertain.