Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate that Google will experience a positive impact on its second-quarter earnings, which are set to be reported after the market closes on Tuesday. Their optimism is linked to the integration of AI advancements, particularly the Gemini project, into Google Cloud and search functions.
Bank of America analysts Justin Post and Nitin Bansal have adjusted their revenue projections upward, citing that the incorporation of AI features such as Gemini will enhance sales. In their recent research note, they expressed confidence that a wider implementation of AI capabilities would generate increased activity in Google’s core search business, despite some initial challenges in the rollout, which were met with skepticism online. They revised the price estimate for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to AI initiatives. Following this announcement, the company’s stock surged, elevating its market capitalization past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s success in the first quarter came on the heels of numerous new AI product launches, including an ambitious universal AI assistant that can interface with smart glasses. The company claims that its latest Gemini AI operates 20% faster than the latest version of ChatGPT.
While Dan Ives of Wedbush expressed a more cautious outlook regarding the long-term effects of AI overviews, he acknowledged their potential to support search monetization gradually. He also noted that AI has already started to positively influence Google Cloud, predicting a 27% rise in cloud revenue compared to last year.
Doug Anmuth from J.P. Morgan echoed the positive sentiment, designating Google as one of their top tech stock picks alongside Uber and Amazon, and highlighting their encouragement from the advancements in generative AI leading up to Alphabet’s earnings announcement.
However, Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI developments appears favorable, it remains uncertain whether these innovations will result in sustained sales growth for the company in the long run.