Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is slated to release its earnings report after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have updated their revenue expectations for Google, citing the integration of its new AI tool, Gemini, into Google Cloud and the AI Overviews feature in Google Search as key sales drivers. They expressed optimism about the expanding AI capabilities within Google’s ecosystem, anticipating that the broader implementation of AI overviews will lead to increased user engagement in Search, despite some initial shortcomings that led to online mockery when the tool occasionally produced errors and misinformation. They also revised their price target for Google shares from $200 to $206.
Back in April, Google reported a remarkable 60% profit increase in the first quarter, partly attributed to AI developments. This financial success propelled its stock price and lifted its market capitalization above $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s impressive performance in the first quarter followed several months of launching new AI products as part of its Gemini offerings. Highlights from the recent Google I/O developer conference included an advanced AI assistant capable of interacting through a user’s smart glasses, with Google claiming its latest Gemini model is 20% faster than the recent version of ChatGPT.
While Dan Ives of Wedbush showed a more cautious stance on the effectiveness of AI Overviews, he suggested that they could provide support for Search monetization in the future. He also noted that AI is already making a positive impact on Google Cloud, with expectations of a 27% revenue increase from the previous year.
Doug Anmuth from J.P. Morgan also shared an optimistic outlook, naming Google among the firm’s top tech stocks, alongside Uber and Amazon. He indicated that the advancements in generative AI have been encouraging as Alphabet approaches its second-quarter earnings.
However, analyst Josh Beck from Raymond James cautioned that while the current narrative around AI is positive, it remains uncertain whether these advancements will yield sustained sales growth for Google in the long run.