Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence could positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have revised their revenue expectations for Google, citing the integration of the Gemini platform into Google Cloud and AI Overviews in Google Search as key factors driving sales growth. They expressed optimism in their research note, emphasizing that the wider adoption of AI Overviews could enhance user engagement in Google’s core Search business, despite initial mishaps where the tool generated errors that became the subject of online jokes. They raised their price target for Google stock from $200 to $206.
In April, Google reported a substantial profit increase of 60% in the first quarter, aided by AI technologies, which resulted in a surge of its stock price and boosted the company’s market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
Following the release of new AI products under its Gemini initiative, Google’s first-quarter success came after a series of innovations presented at its developer conference, Google I/O. These innovations include a universal AI assistant that can interact through smart glasses, with Google claiming that its latest Gemini version is 20% faster than the newest ChatGPT.
While Dan Ives of Wedbush expressed a somewhat cautious outlook on AI Overviews, he acknowledged that this feature might still serve as a long-term advantage for Search monetization. He also noted that AI technology is already positively affecting Google Cloud, projecting a 27% revenue growth from the previous year.
Doug Anmuth from J.P. Morgan endorsed Google as one of their top tech stock picks, highlighting his team’s positive outlook on the progress of generative AI in anticipation of Alphabet’s upcoming earnings report. However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative for Google appears favorable, the long-term impact of AI on Google’s sales remains uncertain.