Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday after the market closes.
Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, crediting the company’s incorporation of the Gemini AI into Google Cloud and AI Overviews in Google Search as key drivers for increased sales. They expressed optimism about the potential impact of AI integrations across Google’s ecosystem, noting that a wider rollout of AI overviews could lead to more user engagement in its core Search business, despite some initial challenges faced during the rollout. Consequently, they have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% jump in profits for the first quarter, largely attributed to AI contributions. This positive performance led to a significant increase in its stock price, pushing its market capitalization beyond the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
The company’s strong first-quarter results were bolstered by a series of new AI product launches under its Gemini initiative. Recent announcements at the Google I/O developer conference included an advanced universal AI assistant envisioned to interact through smart glasses. Google has claimed that their latest version of Gemini AI operates 20% faster than the most recent ChatGPT.
While Wedbush analyst Dan Ives expressed cautious optimism regarding AI Overviews, suggesting they could eventually benefit Search revenue, he highlighted that AI is already positively impacting Google Cloud. He, along with other analysts, anticipates a 27% growth in Cloud revenue year-over-year.
Doug Anmuth from J.P. Morgan has echoed the generally positive outlook, naming Google as one of its top tech stock picks alongside Uber and Amazon, citing a sense of encouragement around Google’s generative AI advancements ahead of the upcoming second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current favorable narrative surrounding Google’s AI developments, the long-term effects on sales remain uncertain.