Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence (AI) will contribute positively to its second-quarter earnings, with Alphabet, Google’s parent company, scheduled to announce its earnings on Tuesday.
Both Bank of America and Wedbush have updated their revenue projections for Google. Analysts Justin Post and Nitin Bansal from Bank of America believe that the integration of the Gemini AI system into Google Cloud and AI Overviews in Google Search will enhance sales prospects. They noted in a research report that they maintain a favorable outlook on the increasing AI applications within Google’s ecosystem, suggesting that a wider implementation of AI Overviews could elevate user activity in the core Search division, despite some early problems that led to humorous internet commentary regarding the AI tool’s inaccuracies. As a result, they have adjusted their price target for Google’s stock from $200 to $206.
In April, Google experienced a notable 60% rise in profits in the first quarter, aided largely by advances in AI technology. Following this financial boost, the company’s stock price surged, elevating its market capitalization beyond the $2 trillion threshold, joining the ranks of Apple, Microsoft, and Nvidia.
This robust financial performance came after several months of launching new AI products as part of its Gemini AI offerings. At the recent Google I/O developer conference, Google introduced a futuristic universal AI assistant that can interact through a user’s smart glasses, claiming that its latest Gemini AI is 20% quicker than the most recent version of ChatGPT.
While Wedbush analyst Dan Ives expressed a more cautious view on the immediate impact of AI Overviews in his latest report, he believes it could support Search monetization in the longer term, while also recognizing the existing positive effects of AI on Google Cloud. Like other Wall Street analysts, he anticipates a 27% growth in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth shared a similar optimistic perspective, listing Google among the firm’s leading tech stock picks, alongside Uber and Amazon, and highlighting the encouraging developments in generative AI ahead of Alphabet’s earnings report. However, Raymond James analyst Josh Beck cautioned that, despite the current favorable AI narrative for Google, it remains uncertain whether AI will significantly enhance the company’s sales in the long run.