Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s artificial intelligence initiatives will positively impact its second-quarter earnings, with the parent company Alphabet set to disclose its earnings after market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue expectations for Google, projecting that the integration of the Gemini AI into Google Cloud and AI Overviews in Google Search will drive sales growth. They expressed optimism about the increasing integration of AI across Google’s platforms, highlighting that a broader rollout of AI overviews could enhance user engagement in the Search sector. Despite initial challenges with the AI Overviews tool, which faced criticism for inaccuracies, they raised their stock price target for Google from $200 to $206.
In April, Google announced a remarkable 60% profit increase in the first quarter, largely attributed to AI advancements, which resulted in a surge in its stock price and pushed its market capitalization past $2 trillion, joining the ranks of Apple, Microsoft, and Nvidia.
Following the rollout of new AI products under its Gemini AI series, Google showcased its latest innovations, including a universal AI assistant at its developer conference, Google I/O. The company claims that its newest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives expressed a more cautious view on the effectiveness of AI Overviews compared to Post and Bansal, he noted the potential for it to enhance Search monetization in the long run. Ives also mentioned that AI is already having a positive impact on Google Cloud, expecting a 27% revenue increase in the sector compared to the previous year.
J.P. Morgan analyst Doug Anmuth added to the positive outlook, ranking Google as one of their top technology stock picks alongside Uber and Amazon, and expressed optimism about the progress in generative AI ahead of Alphabet’s upcoming earnings report. However, Raymond James analyst Josh Beck cautioned that while the current narrative surrounding AI’s impact on Google is favorable, its long-term effects on sales remain uncertain.