Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s advancements in artificial intelligence will positively impact its earnings for the second quarter. Alphabet, Google’s parent company, is set to announce its earnings following the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections for Google, citing the integration of its Gemini AI capabilities into Google Cloud and the AI Overviews feature within Google Search as key factors boosting sales. They expressed optimism about the ongoing AI enhancements throughout Google’s ecosystem and the potential for these features to increase user engagement in the core Search function, despite initial challenges with the AI Overviews, which faced criticism for errors. They have raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, partly attributed to its AI initiatives. This surge contributed to a rise in the company’s stock price, pushing its market value past $2 trillion, aligning it with industry giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results followed a series of new AI product launches under Google’s Gemini framework. Among the highlights from the Google I/O developer conference was the introduction of a universal AI assistant capable of functioning through smart glasses, with Google claiming its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the AI Overviews than his counterparts, he noted that it could contribute to improved search monetization in the long run. He also mentioned that AI is already having a positive impact on Google Cloud, predicting a 27% year-over-year revenue growth for that segment, a forecast shared by other Wall Street analysts.
Doug Anmuth from J.P. Morgan praised Google’s performance and included it among the firm’s top tech stock picks alongside Uber and Amazon, highlighting the promising developments in generative AI in the lead-up to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that although the current narrative surrounding AI at Google is favorable, the long-term impact of AI on the company’s sales remains uncertain.