Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings, with parent company Alphabet set to announce its financial results after the market closes on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this boost to the integration of Gemini into Google Cloud and enhanced AI features in Google Search. In a recent research note, they expressed optimism about the growing AI integration throughout Google’s services, predicting that the wider implementation of AI overviews will enhance activity within the core Search segment. They noted that despite some initial challenges and humorous reactions to AI overviews making mistakes, they have raised their projected stock price for Google from $200 to $206.
In April, Google reported a remarkable 60% profit increase for the first quarter, largely thanks to its AI initiatives, which led to a significant rise in its stock price and lifted the company’s market capitalization to over $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
The strong performance in the first quarter was fueled by numerous AI product launches as part of the Gemini offerings, including an advanced universal AI assistant demonstrated at the Google I/O developer conference. Google claims that this latest version of Gemini AI performs 20% faster than the most recent ChatGPT model.
Dan Ives from Wedbush expressed a more cautious view on the AI Overviews but acknowledged that it could benefit Search monetization over time. He also noted that AI is already positively impacting Google Cloud, agreeing with other analysts that there will likely be a 27% increase in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan echoed the optimistic views about Google, naming it one of the firm’s top tech stock picks alongside Uber and Amazon, citing confidence in the progress made with generative AI ahead of Alphabet’s upcoming earnings announcement.
However, Josh Beck, an analyst at Raymond James, cautioned that despite the current positive narrative surrounding Google’s AI advancements, it remains uncertain whether these developments will lead to sustained long-term sales growth for the company.