Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence are poised to enhance its earnings for the second quarter, with Alphabet expected to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have revised their revenue projections for Google, citing the seamless integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search. They foresee these developments significantly boosting sales.
The analysts expressed optimism about the expanding AI features across Google’s ecosystem, predicting that a wider rollout of AI Overviews will result in increased engagement within the core Search operations. This optimism persists despite some challenges during the initial launch of AI Overviews, which faced scrutiny online due to errors and inaccuracies. As a result, Post and Bansal have adjusted their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, largely driven by its AI initiatives. This surge led to a significant increase in its stock price, pushing its market capitalization beyond the $2 trillion milestone, placing it among tech giants like Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches, particularly under its Gemini AI offerings. Key announcements made during the recent Google I/O developer conference included a groundbreaking AI assistant capable of interacting with users through smart glasses. Google asserts that its latest Gemini AI is 20% more efficient than the latest version of ChatGPT.
While Wedbush analyst Dan Ives expressed some caution regarding the potential of AI Overviews, he noted that it might ultimately provide support for Search monetization in the long run. He also acknowledged the positive impact AI is already having on Google Cloud, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth mirrored these positive sentiments and labeled Google as one of their top technology stocks, alongside Uber and Amazon, highlighting optimism about the company’s advancements in GenAI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that, while the current AI narrative surrounding Google is favorable, the long-term impact of AI on Google’s sales remains uncertain.