Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI initiatives will contribute positively to its second-quarter earnings, with the parent company Alphabet expected to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue projections for Google, citing the integration of the Gemini AI tool into Google Cloud and AI Overviews in Google Search as factors likely to boost sales. They expressed optimism in a recent research note, stating that the wider implementation of AI features could enhance user engagement in the core Search operations, despite some initial setbacks in the rollout that led to humorous internet reactions due to inaccuracies in the AI responses. Consequently, they raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributable to its AI advancements, which propelled its stock and its market capitalization to surpass $2 trillion, placing it alongside tech giants Apple, Microsoft, and Nvidia.
The company’s robust first-quarter results followed numerous releases of new AI products under its Gemini brand. At the recent Google I/O developer conference, Google showcased an advanced AI assistant capable of interacting through smart glasses. According to the company, the latest version of Gemini AI is 20% faster than the current ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on the AI Overviews’ impact, noting it could potentially aid search monetization in the long run, he acknowledged that AI has already started to enhance Google Cloud’s performance. He and his colleagues from Wall Street anticipate a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth mirrored this optimistic outlook, declaring Google as one of the firm’s top technology stock picks alongside Uber and Amazon, and highlighted anticipation for Alphabet’s upcoming earnings report in light of advancements in Generative AI.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears promising, the long-term impact of AI on Google’s sales remains uncertain.