Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to announce its earnings after market close on Tuesday.
Analysts from both Bank of America and Wedbush have revised their revenue outlooks for Google, highlighting the potential benefits of the company’s integration of Gemini into Google Cloud and its AI Overviews feature in Google Search. Bank of America analysts Justin Post and Nitin Bansal stated that they believe these innovations will drive increased sales activity. They noted, despite some initial challenges with the rollout of AI Overviews, that a broader implementation could significantly enhance the core Search business, ultimately upgrading their price target for Google stock from $200 to $206.
In April, Google reported a remarkable profit increase of 60% in the first quarter, largely attributed to its AI initiatives. This strong performance led to a significant rise in its stock price, elevating the company’s market capitalization to beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This positive trend followed a series of new AI product launches under the Gemini brand, including a futuristic universal AI assistant unveiled at the recent Google I/O developer conference. The company claims that its latest Gemini AI is 20% faster than ChatGPT.
While Wedbush analyst Dan Ives expressed caution regarding the immediate impact of the AI Overviews feature, he acknowledged the potential for it to ultimately benefit Search monetization. He also noted that Google’s Cloud division is already experiencing growth due to AI advancements and expects a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth echoed the optimistic outlook and recognized Google as one of the firm’s top tech stock picks, alongside Uber and Amazon. He expressed encouragement regarding the progress of generative AI ahead of Alphabet’s upcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, it remains uncertain whether these advancements will lead to sustained sales growth in the long term.