Google’s recent advancements in artificial intelligence are expected to positively impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is scheduled to release its earnings report after the market closes on Tuesday.
Analysts from Bank of America, Justin Post and Nitin Bansal, have revised their revenue projections for Google upward. They believe the company’s incorporation of its Gemini AI into Google Cloud and the AI Overviews in Google Search will enhance sales. In a research note, they expressed optimism regarding the expansion of AI features across Google’s platform, predicting that a broader implementation of AI Overviews could result in increased user engagement in the Search segment. Despite experiencing issues during the initial rollout of AI Overviews, which attracted criticism online for inaccuracies, they raised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, significantly driven by its AI innovations. This impressive performance led to a surge in its stock price, pushing the company’s market capitalization beyond $2 trillion, allowing it to join the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed the release of various new AI products as part of its Gemini offerings. During its recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through users’ smart glasses. Google also claimed that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives was somewhat less optimistic about the AI Overviews compared to Post and Bansal, he mentioned in a research note that they could potentially support the monetization of Search in the long run. Ives also noted that AI is already contributing positively to Google Cloud, predicting a 27% increase in Cloud revenue year-over-year, in line with other Wall Street analysts.
Doug Anmuth from J.P. Morgan shared a similar positive outlook, naming Google as one of his investment firm’s top tech picks alongside Uber and Amazon. He stated that his team is “encouraged by GenAI progress” ahead of Alphabet’s forthcoming second-quarter earnings report. However, Raymond James analyst Josh Beck cautioned that while the current sentiments surrounding Google’s AI developments are positive, the long-term effects on Google’s sales remain uncertain.