Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google’s advancements in artificial intelligence will enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market closing.
Following a positive outlook on Google’s revenue, Bank of America’s Justin Post and Nitin Bansal highlighted the integration of Gemini into Google Cloud and AI Overviews in Google Search as key drivers of growth. They emphasized their optimism about the increasing use of AI across Google’s platforms, predicting that the broader adoption of AI Overviews will stimulate activity in Google’s core search business. Despite early challenges with AI Overviews, which faced criticism for inaccuracies, they adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, aided in part by its AI initiatives, resulting in a significant rise in its stock price and pushing its market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The first quarter’s positive results followed a series of new AI product launches related to Google’s Gemini AI, including the introduction of a future AI assistant capable of interacting through smart glasses. Google claims its latest Gemini AI model outperforms the latest version of ChatGPT by being 20% faster.
While Wedbush’s Dan Ives expressed a more cautious view on the long-term impact of AI Overviews compared to his counterparts, he noted that AI is already benefiting Google Cloud and predicts a 27% revenue increase in that segment year-over-year. J.P. Morgan’s Doug Anmuth shared an optimistic perspective, designating Google as one of the firm’s top tech stock picks alongside Uber and Amazon, citing encouraging advancements in generative AI ahead of the upcoming earnings release.
However, analyst Josh Beck from Raymond James cautioned that while the current AI narrative for Google is favorable, the long-term effects of AI on boosting sales remain uncertain.