Analysts from Wedbush, J.P. Morgan, and Bank of America expect that Google’s advancements in artificial intelligence will enhance the company’s earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to disclose its earnings on Tuesday after market close.
Both Bank of America and Wedbush have revised their revenue projections for Google upwards. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will help increase sales.
In a recent research note, they expressed optimism about the expanding AI integrations within Google’s ecosystem, suggesting that a broader deployment of AI overviews could lead to increased engagement in the core Search business. This comes despite some initial challenges during the rollout of AI overviews, which faced criticism for inaccuracies. Post and Bansal adjusted their price target for Google’s stock from $200 to $206.
In its April report, Google noted a remarkable 60% increase in profits in the first quarter, significantly attributed to AI initiatives. This performance led to a surge in the stock price, elevating the company’s market capitalization beyond $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following several months of launching new AI products under its Gemini offerings, Google also introduced ambitious plans at its developer conference, Google I/O, including a universal AI assistant meant to operate through smart glasses. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush expressed a more cautious view on AI Overviews compared to Post and Bansal, suggesting that while it may eventually boost Search monetization, its immediate impact is uncertain. However, Ives noted that AI is currently enhancing Google Cloud, and like other analysts, he expects a 27% increase in Cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan shared a similarly positive outlook, naming Google among the firm’s top tech stock picks, alongside Uber and Amazon, praising the progress in generative AI ahead of Alphabet’s earnings announcement.
Analyst Josh Beck from Raymond James warned that while the current AI developments for Google appear promising, it remains unclear whether AI will sustain long-term sales growth.