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 anticipated to release its earnings report after the market closes on Tuesday.
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Following a review, Bank of America’s Justin Post and Nitin Bansal have upgraded their revenue projections for Google, attributing this to the integration of Gemini into Google Cloud and the implementation of AI Overviews in Google Search. They expressed optimism about the growing AI features within Google’s ecosystem, forecasting that a wider implementation of AI Overviews could lead to increased activity in the core Search business, despite early challenges where the tool generated errors. They have also increased their price target for Google’s stock from $200 to $206.
In April, Google reported a significant 60% increase in profits for the first quarter, aided by its AI developments, which resulted in a spike in its stock price and pushed its market capitalization beyond $2 trillion, placing it alongside Apple, Microsoft, and Nvidia.
The company had a fruitful first quarter following a series of new AI product launches as part of its Gemini AI initiatives. At the Google I/O developer conference, it introduced a universal AI assistant with capabilities of visual interaction through smart glasses, claiming that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on AI Overviews compared to his colleagues, he noted that it could potentially benefit Search monetization over time. Ives also emphasized that AI has already been a positive factor for Google Cloud, predicting a 27% increase in Cloud revenue compared to the previous year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic outlook, naming Google as one of its top tech stocks alongside Uber and Amazon. He mentioned being encouraged by the progress of Generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI at Google is favorable, the long-term impact of AI on sales remains uncertain.