Analysts from Wedbush, J.P. Morgan, and Bank of America predict that Google’s advancements in artificial intelligence will positively influence its upcoming second-quarter earnings. Alphabet, Google’s parent company, is scheduled to announce its earnings report following the market close on Tuesday.
According to Bank of America analysts Justin Post and Nitin Bansal, the integration of Google’s Gemini into Google Cloud and its AI Overviews in Search is expected to enhance sales. They remain optimistic about AI’s growing presence in Google’s ecosystem, highlighting that a wider deployment of AI Overviews could increase user engagement in Google’s core Search business, despite initial challenges that attracted online criticism for errors in the tool’s performance. As a result, they have revised their price target for Google’s stock from $200 to $206.
In April, Google reported a remarkable 60% rise in profits during the first quarter, aided by its AI initiatives, which resulted in a significant stock price increase, elevating the company’s market capitalization to over $2 trillion alongside tech giants like Apple, Microsoft, and Nvidia.
Google’s positive first-quarter results came on the heels of several new AI product launches tied to its Gemini AI platform. The company introduced innovations at its Google I/O developer conference, including an advanced AI assistant capable of interacting through users’ smart glasses. Google asserts that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush’s Dan Ives was somewhat cautious regarding the impact of AI Overviews, he mentioned in his Monday note that these tools might eventually support monetization in Search. He also noted that AI is already having a favorable effect on Google Cloud, with expectations of a 27% revenue increase from the previous year.
J.P. Morgan’s Doug Anmuth also expressed a positive outlook, naming Google among the firm’s top technology stock picks along with Uber and Amazon, citing encouraging developments in Generative AI as the company approaches its second-quarter earnings report.
However, Raymond James analyst Josh Beck warned that although the current narrative around Google’s AI is optimistic, the long-term effects of AI on driving sales remain uncertain.