Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance the company’s second-quarter earnings. Alphabet, Google’s parent company, is scheduled to release its earnings report on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue predictions for Google, noting that the integration of Gemini into Google Cloud and AI Overviews in Google Search will likely boost sales. They expressed confidence in the ongoing growth of AI applications across Google’s ecosystem, suggesting that a broader rollout of AI features will enhance user engagement in the core Search service. Despite some early challenges, where initial AI overviews faced criticism for inaccuracies, Post and Bansal raised their stock price target for Google from $200 to $206.
In its first-quarter earnings report in April, Google experienced a remarkable 60% profit increase, largely attributed to its AI initiatives. This strong performance elevated its stock price and pushed its market capitalization above the $2 trillion mark, placing it alongside tech giants like Apple, Microsoft, and Nvidia. The positive results followed numerous new AI product announcements tied to its Gemini AI program, including futuristic tools showcased at the Google I/O developer conference, such as a universal AI assistant that operates through smart glasses. Google claims its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding the immediate impact of AI Overviews, he acknowledged their potential to support Search monetization in the long run. He also noted that AI is already benefiting Google Cloud, predicting a 27% year-over-year increase in Cloud revenue. J.P. Morgan analyst Doug Anmuth echoed this optimistic view, highlighting Google as one of the firm’s top technology stock picks, alongside Uber and Amazon.
However, Raymond James analyst Josh Beck cautioned that, while the current outlook for Google’s AI is positive, the long-term effect of AI on driving sales remains uncertain.