Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are likely to enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after market hours.
Following a new delivery partnership between Uber and Darden Restaurants, shares of the latter surged significantly. Analysts from Bank of America and Wedbush have upgraded their revenue projections for Google. Justin Post and Nitin Bansal from Bank of America believe that Google’s integration of its Gemini AI into Google Cloud and its introduction of AI overviews in search results will drive sales growth.
In a recent research note, they expressed their confidence in the potential of AI integrations across Google’s platforms, mentioning that a wider deployment of AI overviews could enhance user engagement in Google’s core search business. This optimistic outlook comes despite initial challenges and public criticism Google faced during the early stages of the AI overview rollout, which was mocked online for various errors. Consequently, Post and Bansal have raised their price target for Google stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, fueled in part by its AI initiatives. This surge caused the stock price to soar, increasing the company’s market capitalization above $2 trillion, placing it alongside tech giants Apple, Microsoft, and Nvidia.
Google’s impressive first-quarter results are a result of several new AI products launched in the months leading up to it, particularly from its Gemini AI suite. At its recent developer conference, Google I/O, the company unveiled an ambitious AI assistant capable of interacting through smart glasses. It boasts that the latest version of Gemini AI is 20% faster than the most recent iteration of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the long-term prospects of AI Overviews, he noted that it could positively impact search monetization over time. He also sees AI as a boon for Google Cloud, anticipating a 27% growth in Cloud revenue compared to last year, a sentiment shared by several analysts on Wall Street.
J.P. Morgan analyst Doug Anmuth mirrored this optimism, recently designating Google as one of the firm’s top technology picks, alongside Uber and Amazon, and expressed enthusiasm about the advancements in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI developments seem promising for Google, the long-term impact on sales remains uncertain.