Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with the company set to announce results after the market closes on Tuesday.
Following a delivery partnership with Uber, shares of Darden Restaurants saw significant gains. Bank of America analysts Justin Post and Nitin Bansal have increased their revenue forecasts for Google, attributing this rise to the company’s integration of its AI technology, Gemini, into Google Cloud services and its AI Overviews in Google Search. They expressed optimism about AI’s role in enhancing user engagement within the search platform, despite setbacks during the initial AI Overviews rollout, which drew some online ridicule due to errors. Their price target for Google stock has been raised from $200 to $206.
In its last earnings report from April, Google had announced a remarkable 60% profit increase for the first quarter, aided by its AI initiatives. This growth propelled the company’s market capitalization beyond $2 trillion, enabling it to join the ranks of tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter was supported by a series of AI product launches under its Gemini AI initiative. During the annual Google I/O developer conference, the company unveiled a next-generation AI assistant capable of interacting through smart glasses and claimed that its latest Gemini AI boasts a 20% speed advantage over the newest version of ChatGPT.
While Wedbush’s Dan Ives expressed some skepticism about the immediate impact of AI Overviews, he acknowledged the potential for these tools to enhance search monetization in the long run. He also noted that AI is already contributing to the growth of Google Cloud, projecting a 27% year-over-year revenue increase for the sector.
J.P. Morgan’s Doug Anmuth shared a positive outlook, naming Google as one of the firm’s top tech stock picks alongside Uber and Amazon, highlighting their favorable expectations regarding advancements in generative AI prior to Alphabet’s forthcoming earnings announcement. However, Raymond James analyst Josh Beck cautioned that, despite the currently positive sentiment surrounding AI’s role in Google’s business, its long-term effectiveness in driving sales growth remains uncertain.