Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively impact its second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Analysts at Bank of America, Justin Post and Nitin Bansal, have increased their revenue projections for Google, crediting the integration of the Gemini AI system into Google Cloud and enhancements in Google Search with boosting sales. They expressed optimism regarding the ongoing AI advancements within Google’s ecosystem, stating in a recent report that the wider implementation of AI overviews should lead to heightened user engagement in the core Search business. Their outlook on Google’s stock price shifted from $200 to $206 following their assessment.
In April, Google reported a remarkable 60% profit surge in the first quarter, partly attributable to its AI initiatives, which resulted in its stock price rising and its market capitalization surpassing $2 trillion, aligning it with other tech giants like Apple, Microsoft, and Nvidia.
This impressive performance came on the heels of a series of new AI product launches under the Gemini AI series, including a next-generation universal AI assistant showcased during the Google I/O developer conference, designed to interact via smart glasses. Google claims its latest Gemini AI can perform tasks 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed some reservations about the potential impact of AI Overviews on long-term Search monetization, he acknowledged that AI is already driving growth in Google Cloud, with many analysts anticipating a 27% rise in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth reiterated a positive outlook on Google, designating it as one of the firm’s top tech stock picks alongside Uber and Amazon, noting his team’s optimism regarding the progress of generative AI in anticipation of Alphabet’s earnings report.
However, Josh Beck of Raymond James cautioned that, while the current narrative around AI is favorable, its long-term impact on driving sales for Google remains uncertain.