Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s upcoming second-quarter earnings will be positively influenced by the company’s advancements in artificial intelligence. Alphabet, Google’s parent company, is scheduled to disclose its earnings after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue projections for Google, highlighting that the integration of Gemini into Google Cloud and AI Overviews in Google Search is expected to enhance sales figures. They expressed confidence in the growing incorporation of AI within Google’s ecosystem, suggesting that an extensive rollout of AI Overviews will likely lead to increased engagement in Google Search, despite a rocky start for the feature, which faced criticism for inaccuracies. Their price target for Google’s stock has been raised from $200 to $206.
In April, Google reported a remarkable 60% profit increase in the first quarter, significantly attributed to its AI developments. This surge in profits resulted in a stock price increase that elevated the company’s market capitalization beyond $2 trillion, joining the ranks of tech giants such as Apple, Microsoft, and Nvidia.
The strong first-quarter results were supported by numerous new AI product launches as part of Google’s Gemini AI initiative. Notable announcements at the Google I/O developer conference included a futuristic AI assistant capable of visually and verbally interacting through a user’s smart glasses. Google claims that its latest version of Gemini AI is 20% faster than the most recent ChatGPT.
Dan Ives from Wedbush expressed a more cautious outlook on AI Overviews compared to his peers, suggesting that while it might eventually benefit Search revenue, its immediate impact is less certain. However, he noted that AI is already playing a significant role in boosting Google Cloud revenues, with expectations for a 27% year-over-year increase.
Doug Anmuth from J.P. Morgan shared a similar optimistic view, designating Google as one of the investment firm’s top tech stock picks, alongside Uber and Amazon. He expressed encouragement over the progress in generative AI ahead of Alphabet’s earnings report.
Conversely, Raymond James analyst Josh Beck cautioned that while the current enthusiasm surrounding AI is promising for Google, it remains uncertain whether this will translate into long-term sales growth.