Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings on Tuesday after the market closes.
According to Bank of America analysts Justin Post and Nitin Bansal, the integration of the Gemini AI into Google Cloud and the introduction of AI Overviews in Google Search is expected to significantly boost sales. They maintain a positive outlook on the expanding AI features within Google’s ecosystem, suggesting that a more extensive rollout of AI overviews could drive increased user engagement in core Search operations. Despite some early challenges with the AI overviews, which drew criticism online for errors and inaccuracies, the analysts have raised their price target for Google’s stock from $200 to $206.
In the first quarter of this year, Google reported a remarkable 60% surge in profits, largely attributed to its AI developments. This impressive performance led to a rise in its stock price, elevating the company’s market capitalization beyond the $2 trillion mark, joining the ranks of tech giants such as Apple, Microsoft, and Nvidia.
Google’s strong results followed a succession of new AI product launches, part of its Gemini AI initiative. Notably, the company unveiled a futuristic universal AI assistant capable of interacting through smart glasses during its recent developer conference, Google I/O. Google claims that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the potential impact of AI Overviews, he acknowledged in a recent report that it could gradually support Search monetization. He also noted that AI is already positively influencing Google Cloud revenue, anticipating a 27% year-over-year increase, similar to other analysts’ expectations.
J.P. Morgan analyst Doug Anmuth shared an optimistic outlook, recently naming Google among its top technology stock picks alongside Uber and Amazon, citing promising advancements in generative AI as a positive sign ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google appears favorable, the long-term impact of AI on the company’s sales remains uncertain.