Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advances in artificial intelligence will enhance its earnings for the second quarter. Alphabet, Google’s parent company, is scheduled to announce its earnings after the market closes on Tuesday.
Bank of America analysts, Justin Post and Nitin Bansal, have raised their revenue projections for Google, crediting the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search with boosting sales. They expressed confidence in the potential of AI features across Google’s ecosystem, suggesting that a more extensive rollout of AI overviews could increase activity within the core Search business, despite earlier issues during the rollout that led to online ridicule due to errors made by the tool. As a result, Post and Bansal have increased their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, thanks in part to AI advancements, which in turn caused its stock price to soar and its market capitalization to exceed $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
This strong performance followed extensive releases of new AI products under the Gemini branding. At the recent Google I/O developer conference, the company unveiled a universal AI assistant that could interact through smart glasses and claimed that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
Dan Ives from Wedbush provided a tempered outlook on AI Overviews compared to Post and Bansal but noted that it could eventually benefit Search monetization. He also highlighted that AI has already been a boon for Google Cloud, projecting a 27% growth in Cloud revenue from the previous year.
J.P. Morgan’s Doug Anmuth shared a positive perspective, categorizing Google as one of the firm’s top tech stock picks alongside Uber and Amazon, expressing optimism regarding the progress of Generative AI before Alphabet’s earnings report.
However, Josh Beck from Raymond James cautioned that while the current AI narrative surrounding Google is encouraging, the long-term impact of AI on the company’s sales remains uncertain.