Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will lead to impressive earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for the company, attributing the expected boost to the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search. They 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 optimism exists despite some initial challenges with AI Overviews, which faced criticism online for inaccuracies. They have adjusted their price forecast for Google’s stock from $200 to $206.
In its first quarter, Google reported a significant 60% increase in profits, largely due to AI developments, which caused its stock price to surge and raised its market capitalization above $2 trillion, joining Apple, Microsoft, and Nvidia.
The impressive performance in the first quarter came after months of launching new AI products as part of its Gemini AI initiative. During its recent Google I/O developer conference, the company introduced an advanced AI assistant that can interact through users’ smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view regarding AI Overviews, he noted that it “may become a tailwind for Search monetization over time.” He also identified that AI is already enhancing Google Cloud, predicting a 27% growth in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar positive outlook, naming Google among its top tech stock picks, alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI as Alphabet approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that despite the current positive narrative around AI for Google, it remains uncertain whether these advancements will sustain an increase in sales over the long term.