Google’s recent advancements in artificial intelligence are anticipated to enhance its earnings report for the second quarter, as noted by analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to disclose its earnings after trading closes on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have adjusted their revenue projections for Google upwards, crediting the integration of its Gemini AI into Google Cloud and AI Overviews in Google Search for expected sales growth. In a recent research note, they expressed optimism regarding the expanding AI capabilities within Google’s ecosystem, suggesting that a wider introduction of AI Overviews could increase activity in the core Search segment. This perspective comes in light of earlier challenges in the initial deployment of AI Overviews, which faced criticism for producing errors and misinformation. Consequently, they raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% jump in profits for the first quarter, significantly attributed to its AI initiatives. Following this announcement, the company’s stock price surged, elevating its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results came after a series of new AI product launches stemming from its Gemini AI platform. Among the latest innovations unveiled during the Google I/O developer conference was a futuristic AI assistant capable of seeing and communicating through a user’s smart glasses. Google claims its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives conveyed a more cautious view on AI Overviews compared to his peers, he noted in a research note that these tools could eventually support monetization in Search. He also emphasized that AI is already benefiting Google Cloud, predicting, alongside other Wall Street analysts, a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth expressed similar optimism, ranking Google among the investment firm’s top technology stocks, alongside Uber and Amazon. He indicated that his team is excited about the advancements in generative AI ahead of Alphabet’s earnings report for the second quarter.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current narrative surrounding AI at Google is favorable, the long-term impact of AI on the company’s sales remains uncertain.