Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence are likely to enhance its earnings in the second quarter. Alphabet, Google’s parent company, is expected to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, attributing their optimism to the integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search. They noted that these innovations could stimulate increased activity in Google’s core Search business, despite some initial challenges when AI Overviews were first introduced, leading to humorous blunders on the internet. They raised their price target for Google shares from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by its AI developments, which resulted in a surge in its stock price and pushed its market capitalization above $2 trillion, joining the ranks of other tech giants like Apple, Microsoft, and Nvidia.
This strong performance came after several months of launching new AI products as part of Google’s Gemini initiative. Recent announcements at the Google I/O developer conference included a groundbreaking universal AI assistant capable of interacting through users’ smart glasses. Google claims this new version of Gemini AI operates 20% faster than the latest ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious outlook on the long-term impact of AI Overviews on Search monetization, he acknowledged that AI is already enhancing Google Cloud revenue, projecting a 27% increase compared to the previous year.
Doug Anmuth from J.P. Morgan shared a similar optimistic view, ranking Google among his firm’s top tech stocks alongside Uber and Amazon, ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI is positive, the long-term effects on Google’s sales remain uncertain.