Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings report, scheduled for release on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, highlighting the impact of the Gemini integration within Google Cloud and AI Overviews in Google Search on sales growth. They expressed confidence in the potential of AI enhancements across Google’s ecosystem to drive more user activity in its core Search operations, resulting in an upgraded price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% rise in profits for the first quarter, partly attributed to its AI initiatives, which also led to a surge in its stock price and pushed its market capitalization past $2 trillion, aligning it with industry giants like Apple, Microsoft, and Nvidia.
The positive results in the first quarter followed the rollout of new AI products as part of Google’s Gemini offering. Notably, during the Google I/O developer conference, Google introduced a next-generation AI assistant capable of visual interaction through smart glasses, claiming its latest systems are 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews’ impact on Search monetization, he acknowledged their potential long-term benefits, noting that AI is already contributing positively to Google Cloud revenue. Ives anticipates a 27% increase in Cloud revenue compared to last year.
J.P. Morgan analyst Doug Anmuth also shared a positive outlook, recently naming Google as one of its top tech stock picks, alongside Uber and Amazon, citing optimism regarding the progress of generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current sentiment surrounding Google’s AI prospects is favorable, the long-term effects on sales remain uncertain.