Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s recent advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this to the integration of Gemini into Google Cloud and AI Overviews within Google Search. They expressed confidence that the rollout of AI features will stimulate growth in the core Search business, despite initial challenges with AI Overviews that resulted in some humorous errors. They have raised their price target for Google’s stock from $200 to $206.
In its April earnings report, Google showcased a remarkable 60% rise in profits for the first quarter, significantly fueled by AI contributions. This growth propelled its market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Following months of launching new AI-powered products under its Gemini brand, Google unveiled exciting updates during its developer conference, Google I/O. One notable announcement was a universal AI assistant that can interact through smart glasses. Google claims its latest Gemini AI operates at 20% faster speeds than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a slightly cautious outlook on the AI Overviews feature, he acknowledged its potential to enhance Search revenue in the long run. He also noted that AI has already been beneficial for Google Cloud, echoing Wall Street’s expectation of a 27% rise in Cloud revenue year-over-year.
J.P. Morgan’s Doug Anmuth joined the positive outlook, designating Google as one of the firm’s top tech picks, alongside Uber and Amazon. He expressed optimism about Google’s progress in generative AI as the company approaches its second-quarter earnings release.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative for Google, the long-term impact on sales remains uncertain.