Analysts from Wedbush, J.P. Morgan, and Bank of America are predicting that Google’s recent advancements in artificial intelligence will positively impact its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, citing the integration of the Gemini AI into Google Cloud and enhanced AI Overviews in Google Search as key factors for expected sales growth. They expressed optimism about AI’s expanding role within Google’s ecosystem, suggesting that a wider rollout of AI Overviews will boost user activity in the core Search business, despite some initial challenges with the tool that led to internet criticisms. Post and Bansal adjusted their price target for Google’s stock from $200 to $206.
In April, Google announced a remarkable 60% increase in profits for the first quarter, largely driven by its AI initiatives, resulting in a surge in its stock price and raising its market capitalization above the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results followed several months of launching new AI technologies as part of its Gemini AI suite. At its recent Google I/O developer conference, the company showcased innovations, including a universal AI assistant designed to operate with smart glasses. Google claims its latest Gemini AI is 20% faster than the newest version of ChatGPT.
While Wedbush’s Dan Ives showed some reservations regarding the AI Overviews, he noted in a report that they could enhance Search monetization over time. He also pointed out that AI is already having a positive effect on Google Cloud, anticipating a 27% rise in Cloud revenue compared to the previous year.
J.P. Morgan analyst Doug Anmuth shared the positive outlook, designating Google as one of the firm’s top tech stocks, alongside Uber and Amazon, and he expressed encouragement regarding the progress of generative AI before Alphabet’s second-quarter earnings report.
However, Josh Beck, an analyst at Raymond James, cautioned that while the current narrative surrounding AI at Google appears positive, it remains uncertain whether these advancements will lead to sustained long-term sales growth.