Analysts from Wedbush, J.P. Morgan, and Bank of America suggest that Google’s advancements in artificial intelligence are poised to enhance its earnings for the second quarter, with Alphabet, Google’s parent company, set to announce its earnings after market close on Tuesday.
Both Bank of America and Wedbush have upgraded their revenue projections for Google, noting that the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search are likely to drive sales. Bank of America analysts Justin Post and Nitin Bansal commented that they are optimistic about the expanding AI capabilities across Google’s services, suggesting that a wider deployment of AI Overviews could result in increased user engagement with the core Search operations. Despite some initial issues with the rollout of AI Overviews, which garnered some online ridicule for inaccuracies, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% surge in profits for the first quarter, driven in part by its AI initiatives. This performance led to a significant jump in its stock price, elevating the company’s market value beyond $2 trillion, placing it alongside industry giants like Apple, Microsoft, and Nvidia.
The robust first-quarter results followed months of new AI product introductions associated with its Gemini AI suite. At the recent Google I/O developer conference, the company introduced a futuristic universal AI assistant designed to interact through users’ smart glasses, claiming that the latest version of Gemini AI is 20% faster than the newest iteration of ChatGPT.
Although Wedbush’s Dan Ives expressed a somewhat cautious view on the potential impact of AI Overviews, he acknowledged that they could eventually benefit Search monetization. He also noted that AI has already begun to enhance Google Cloud, predicting a 27% year-over-year increase in Cloud revenue, a sentiment shared by other Wall Street analysts.
J.P. Morgan analyst Doug Anmuth reinforced this positive outlook, identifying Google as one of the firm’s top technology stock picks (alongside Uber and Amazon) last week, emphasizing positive developments in generative AI ahead of Alphabet’s earnings announcement. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding Google’s AI is encouraging, the long-term impact on sales remains uncertain.