Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence (AI) will positively impact its second-quarter earnings, which are set to be announced after market close on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue projections for Alphabet, Google’s parent company. Analysts Justin Post and Nitin Bansal from Bank of America believe the integration of the Gemini AI into Google Cloud and the new AI Overviews in Google Search will drive sales growth. In a recent research note, they expressed confidence that the rollout of AI Overviews would enhance user engagement with core Search functions, despite some initial challenges that resulted in the tool receiving criticism on social media for producing errors. They have also increased their price target for Google’s stock from $200 to $206, reflecting this positive sentiment.
In its first-quarter earnings report earlier this year, Google noted a remarkable 60% increase in profits, largely attributed to advancements in AI. This success propelled its market capitalization above $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia. The company’s recent developments include a range of AI products showcased at its Google I/O developer conference, such as an upcoming universal AI assistant capable of interacting through smart glasses, with claims that its Gemini AI is 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives expressed some reservation regarding AI Overviews, suggesting they might only provide a gradual benefit to Search monetization, he remains confident that AI is already contributing positively to Google Cloud’s performance. Ives anticipates a substantial 27% increase in Cloud revenue year-over-year.
J.P. Morgan analyst Doug Anmuth also shares the positive outlook on Google’s prospects, ranking it among top tech stocks like Uber and Amazon. He noted a strong sense of encouragement surrounding Google’s progress in generative AI ahead of the earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI trend paints a positive picture for Google’s immediate future, the long-term impact of AI on the company’s overall sales remains uncertain.
In summary, as Google prepares to release its earnings, analyst optimism about AI’s role in driving growth is palpable, suggesting a potentially bright future for the tech giant. The excitement surrounding Google’s innovations and strategic use of AI serves as a reminder of the transformative potential these technologies hold for enhancing user experience and business performance.