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, as the parent company Alphabet is set to announce its earnings following the market close on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have upgraded their revenue projections for Google, citing the integration of the Gemini AI technology into Google Cloud and AI Overviews in Google Search as significant contributors to potential sales growth. They expressed confidence in the ongoing AI developments within Google’s ecosystem, suggesting that a wider implementation of AI overviews could increase user engagement in the core Search segment. Despite some initial issues during the rollout of AI overviews, which drew humorous criticism online 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, attributed in part to its AI strategies. This performance led to a surge in its stock price, elevating the company’s market valuation beyond the $2 trillion mark, joining peers like Apple, Microsoft, and Nvidia.
Google’s robust first-quarter results were bolstered by a series of new AI product launches, including offerings from its Gemini AI program. At the recent Google I/O developer conference, the company unveiled ambitions for a universal AI assistant designed to operate through smart glasses, stating that its latest Gemini AI is 20% more efficient than the latest ChatGPT version.
While Wedbush analyst Dan Ives expressed a more cautious outlook on the AI Overviews than some of his peers, he believes it has the potential to positively impact monetization in the Search business over time. Ives also noted that AI is already positively influencing revenue in Google Cloud, predicting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth shared a similar optimistic view, highlighting Google as one of the investment firm’s preferred tech stocks alongside Uber and Amazon, and expressing enthusiasm for the progress in Generative AI ahead of Alphabet’s forthcoming earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current outlook for AI at Google is favorable, it remains uncertain if AI will sustain long-term sales growth for the company.