Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advances in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday evening.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue projections for Google, suggesting that the integration of the Gemini AI into Google Cloud and the AI Overviews feature within Google Search will foster sales growth. In their recent research note, they expressed optimism about the growing AI features across Google’s platform, believing that a wider implementation of AI Overviews will lead to increased engagement in the core Search business. This comes despite some initial setbacks during the rollout of AI Overviews, which faced criticism for generating errors. As a result, they increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI efforts, which led to a significant rise in its stock price and pushed the company’s market cap beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results were aided by the continuous release of AI products within its Gemini AI framework. At its recent developer conference, Google I/O, the company introduced futuristic AI capabilities, including a universal assistant designed to interact through users’ smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed more caution regarding the AI Overviews, noting they might support Search monetization in the long run, he also highlighted that AI is already having a positive effect on Google Cloud. Ives predicts that Google will see a 27% year-over-year increase in Cloud revenue, consistent with the outlook from other Wall Street analysts.
J.P. Morgan’s Doug Anmuth echoed this positive sentiment, ranking Google among its top tech stocks, alongside Uber and Amazon, and expressing optimism about the progress of generative AI as Alphabet prepares for its second-quarter earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current narrative around AI at Google is favorable, its long-term impact on sales remains uncertain.