Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have raised their revenue projections for Google. They believe that the integration of the Gemini AI into Google Cloud and the implementation of AI Overviews in Google Search will significantly elevate sales.
In a research report released last week, they expressed optimism about the expansion of AI features within Google’s ecosystem, suggesting that a more widespread introduction of AI Overviews will invigorate activity in the core Search segment. This optimism comes despite early challenges in the rollout of AI Overviews, which initially faced public ridicule for errors. Post and Bansal revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits during the first quarter, largely attributed to its AI initiatives. This impressive performance led to a surge in the company’s stock price, raising its market capitalization above the $2 trillion mark alongside tech giants like Apple, Microsoft, and Nvidia.
The strong first-quarter results followed months of launching new AI products as part of Google’s Gemini offerings. Notably, at the recent Google I/O developer conference, the company showcased a universal AI assistant designed to interact through users’ smart glasses, claiming its latest Gemini AI technology is 20% faster than the latest version of ChatGPT.
Wedbush analyst Dan Ives expressed a more cautious stance on the potential of AI Overviews than Post and Bansal. However, he noted that it could eventually support monetization in the Search sector. He also pointed out that AI is already contributing positively to Google Cloud’s performance, with expectations for a 27% increase in Cloud revenue year-over-year, in line with other analysts’ projections.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, listing Google as one of the firm’s top technology investment stocks alongside Uber and Amazon. He highlighted the “encouraging” progress in generative AI as the company approaches its second-quarter earnings report.
Meanwhile, analyst Josh Beck from Raymond James cautioned that while the current narrative surrounding Google’s AI developments is favorable, it remains uncertain whether such advancements will lead to sustained long-term sales growth for the company.