Analysts from Wedbush, J.P. Morgan, and Bank of America anticipate a positive impact on Google’s second-quarter earnings due to its advancements in artificial intelligence. Google’s parent company, Alphabet, is scheduled to release its earnings report after the bell on Tuesday.
Bank of America analysts Justin Post and Nitin Bansal have increased their revenue projections for Google, attributing this change to the integration of the Gemini AI into Google Cloud and the AI Overviews feature in Google Search, which they believe will enhance sales.
In a recent research note, the analysts expressed confidence in the ongoing AI integrations across Google’s platforms and suggested that a broader implementation of AI Overviews could lead to increased activity in Google’s core Search business. This comes despite some initial challenges faced by the AI overview tool, which drew criticism for generating errors and inaccuracies. Subsequently, they raised their price target for Google’s stock from $200 to $206.
Earlier this year, Google reported a remarkable 60% increase in profits for the first quarter, largely driven by AI innovations. This performance led to a surge in its stock price, elevating the company’s market capitalization beyond $2 trillion, placing it alongside other tech giants such as Apple, Microsoft, and Nvidia.
Google’s strong first-quarter results followed a series of new AI product launches under its Gemini AI initiative. At the recent Google I/O developer conference, the company unveiled an advanced AI assistant capable of interacting through smart glasses. Google asserts that its new Gemini AI is 20% faster than the latest version of ChatGPT.
While Dan Ives from Wedbush showed a more cautious outlook on AI Overviews compared to Post and Bansal, he noted that it could eventually benefit Search monetization. Ives also emphasized the positive influence AI is already having on Google Cloud, predicting a 27% revenue increase for Cloud from the previous year.
J.P. Morgan analyst Doug Anmuth expressed similar optimism, identifying Google as one of the firm’s top technology stock picks alongside Uber and Amazon. He highlighted the encouraging advancements in generative AI leading up to Alphabet’s earnings report.
However, Raymond James analyst Josh Beck cautioned that, despite the current optimism surrounding Google’s AI narrative, the long-term effects of AI on sales growth remain uncertain.