Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s AI strategies will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections upwards for Google, noting that the integration of Gemini into Google Cloud and AI Overviews within Google Search should contribute positively to sales. They expressed optimism about the growing AI features across Google’s platform, believing that a widespread implementation of AI overviews will lead to increased activity in the core Search operations. This outlook comes despite some initial issues reported with the AI overviews, which faced criticism for inaccuracies during their rollout. Following this assessment, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% jump in profits for the first quarter, partly attributed to its AI advancements, which propelled its stock price and helped elevate the company’s market capitalization over the $2 trillion threshold, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The successful first quarter was preceded by a series of new AI product launches related to the Gemini AI initiative. At the recent Google I/O developer conference, the company introduced a next-generation AI assistant designed to operate through smart glasses. Google claims that its latest iteration of Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the immediate impact of AI Overviews, he acknowledged that they could eventually support revenue from Search. He also noted that AI is already playing a significant role in boosting Google Cloud’s revenues, projecting a 27% growth in Cloud revenue year-over-year, in line with other analysts’ forecasts.
J.P. Morgan’s Doug Anmuth confirmed the positive outlook, marking Google as one of the top technology stocks, alongside Uber and Amazon, and noted his team’s optimism regarding the advancements in Generative AI ahead of Alphabet’s earnings release.
However, Raymond James analyst Josh Beck cautioned that, while the current sentiment surrounding Google’s AI prospects is optimistic, the long-term impact of AI on the company’s revenue remains uncertain.