Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence (AI) are likely to enhance its earnings for the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report after the market closes on Tuesday.
Following an assessment of Google’s revenue potential, analysts from Bank of America, including Justin Post and Nitin Bansal, have adjusted their revenue projections upward. They attribute this positive outlook to the integration of AI tools such as Gemini into Google Cloud and AI Overviews in Google Search, anticipating these features will substantially increase sales.
In a recent research note, the analysts stated, “We remain positive on growing AI integrations across Google’s ecosystem and think a broader rollout of AI overviews will help drive higher activity in the core Search business.” This comes despite initial challenges faced by AI Overviews, which garnered attention due to some early inaccuracies. As a result, Post and Bansal have increased their price target for Google’s shares from $200 to $206.
Earlier this year, Google reported a significant 60% increase in profits for the first quarter, largely attributed to its AI initiatives, which propelled its stock price over the $2 trillion market capitalization threshold, aligning it with tech giants such as Apple, Microsoft, and Nvidia.
Following the successful launch of its Gemini AI products, Google introduced several innovative offerings at its Google I/O developer conference. Notably, the company unveiled an AI assistant capable of visual and verbal interaction through smart glasses, claiming its latest Gemini AI to be 20% faster than the latest ChatGPT version.
Dan Ives from Wedbush showed a slightly more cautious stance towards AI Overviews, but noted that it could eventually enhance Search monetization. He also affirmed that AI advancements are already positively impacting Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth of J.P. Morgan supported the optimistic outlook, naming Google as one of their top technology stock picks alongside Uber and Amazon, and expressing hope regarding the developments in generative AI prior to Alphabet’s quarterly earnings release.
On the other hand, Raymond James analyst Josh Beck cautioned that while the current sentiment towards Google’s AI is largely favorable, the long-term impact of AI on the company’s sales remains uncertain.