Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s advancements in artificial intelligence will enhance its second-quarter earnings. Parent company Alphabet is scheduled to release its earnings report on Tuesday.
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Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, crediting the company’s integration of the Gemini AI into Google Cloud and AI Overviews in Google Search for this boost in sales. They stated in a recent research note that they are optimistic about the growing integration of AI across Google’s services, believing that a wider adoption of AI Overviews could increase user engagement in the core Search business. Despite some initial challenges with the rollout of AI Overviews, which drew some internet critique for inaccuracies, they have raised their stock price target for Google from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, largely attributed to its AI initiatives. This positive performance led to a significant rise in its stock price, elevating the company’s market capitalization above $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following months of launching new AI products as part of the Gemini offerings, Google unveiled its latest innovations at the Google I/O developer conference, including an advanced AI assistant designed to interact through a user’s smart glasses. Google asserts that its Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious perspective on the AI Overviews compared to his peers, he noted in a Monday report that it could eventually benefit Search monetization. He also acknowledged the current positive impact of AI on Google Cloud, predicting a 27% increase in cloud revenue year-on-year, consistent with sentiments shared by other Wall Street analysts.
J.P. Morgan analyst Doug Anmuth echoed the positive outlook, naming Google as one of the firm’s leading tech stock picks alongside Uber and Amazon, highlighting his team’s encouragement over the advancements in Generative AI ahead of Alphabet’s upcoming earnings announcement. However, Raymond James analyst Josh Beck cautioned that although the short-term AI dynamics appear favorable for Google, the long-term impact on sales remains uncertain.