According to analysts from Wedbush, J.P. Morgan, and Bank of America, Google’s advancements in artificial intelligence are expected to enhance its earnings in the second quarter. Alphabet, Google’s parent company, is slated to announce its earnings report after market close on Tuesday.
Recent assessments from Bank of America and Wedbush have revised Google’s revenue projections upward. Analysts Justin Post and Nitin Bansal believe that the integration of the Gemini AI platform into Google Cloud and AI Overviews in Google Search will significantly boost the company’s sales.
In a research note released last week, the analysts expressed confidence in the expanding use of AI across Google’s services and predicted that a broader implementation of AI Overviews will increase user engagement in the core Search business. Despite initial challenges with AI Overviews, which faced criticism for inaccuracies, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, driven in part by its AI initiatives. This performance led to a surge in its stock price, elevating the company’s market capitalization beyond $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
The successful first quarter followed a series of new AI product launches as part of Google’s Gemini AI offerings. One notable unveiling at the Google I/O developer conference was a futuristic universal AI assistant capable of interacting through smart glasses. Google has claimed that its latest Gemini AI operates 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed caution regarding AI Overviews, suggesting it might take time for them to positively impact Search monetization, he acknowledged AI’s current contribution to Google Cloud. Ives, along with other analysts, anticipates a 27% year-over-year increase in Google Cloud revenue.
J.P. Morgan’s Doug Anmuth shared a positive outlook, recently naming Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He noted that his team is optimistic about the progress in generative AI leading up to Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while Google’s current AI narrative is encouraging, the long-term impact of AI on sales growth remains uncertain.