Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s artificial intelligence advancements are likely to enhance its second-quarter earnings. Alphabet, Google’s parent company, is expected to announce its earnings later this Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue projections for Google, highlighting that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search is set to increase sales. They expressed optimism about the ongoing AI integrations within Google’s ecosystem, believing that a wider implementation of AI overviews will boost engagement in the core Search business, despite some initial challenges when the tool encountered issues that led to public ridicule. They raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits for the first quarter, attributed in part to its AI initiatives. This announcement resulted in a surge in the company’s stock price, elevating its market capitalization beyond the $2 trillion mark, joining the ranks of leading companies like Apple, Microsoft, and Nvidia.
Following extensive releases of new AI products under the Gemini AI brand, Google showcased a forward-looking universal AI assistant during its recent developer conference, Google I/O, which is designed to interact visually and verbally through smart glasses. Google claims that its latest version of Gemini AI performs 20% faster than the newest iteration of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he noted that these tools could eventually support Search monetization. He also pointed out that Google Cloud already shows benefits from AI advancements, anticipating a 27% growth in Cloud revenue compared to the previous year.
Similarly, J.P. Morgan’s Doug Anmuth recognized the positive outlook, selecting Google as one of the investment firm’s top tech picks along with Uber and Amazon, citing optimism about the progress in generative AI ahead of Alphabet’s quarterly earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding AI at Google is favorable, the long-term impact on sales remains uncertain.