Analysts from Wedbush, J.P. Morgan, and Bank of America believe that Google’s advancements in artificial intelligence will significantly enhance its second-quarter earnings. The parent company, Alphabet, is scheduled to release its earnings report after the market closes on Tuesday.
Both Bank of America and Wedbush have revised their revenue projections for Google upward. Analysts Justin Post and Nitin Bansal from Bank of America anticipate that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will enhance revenue. They expressed optimism about ongoing AI developments within Google, suggesting that a wider implementation of AI features could lead to increased engagement in the core Search business. Despite early challenges with AI Overviews, which garnered some online criticism for generating errors, they raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% profit increase in the first quarter, largely attributed to its AI initiatives. This resulted in a surge in stock prices, elevating the company’s market capitalization to over $2 trillion, placing it among industry giants like Apple, Microsoft, and Nvidia.
Google’s positive performance in the first quarter was supported by a series of new AI product launches, particularly from its Gemini initiative. At the recent Google I/O developer conference, the company showcased an innovative universal AI assistant designed to interface through smart glasses. Google claims its latest version of Gemini AI is 20% more efficient than the current iteration of ChatGPT.
While Dan Ives from Wedbush expressed a more cautious view regarding AI Overviews, he noted that they could later contribute positively to monetizing Search. He also pointed out that AI is already benefiting Google Cloud, predicting a 27% rise in Cloud revenue compared to the previous year.
Doug Anmuth from J.P. Morgan shared an optimistic outlook, designating Google as one of the leading tech stocks, alongside Uber and Amazon, and expressed positive expectations for the AI advancements prior to Alphabet’s earnings announcement.
Raymond James analyst Josh Beck issued a cautionary note, indicating that while the short-term narrative surrounding AI for Google seems promising, the long-term impact on sales remains uncertain.