Google’s advancements in AI are expected to favorably impact its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Google’s parent company, Alphabet, is set to release its earnings report after the market closes on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have increased their revenue projections for Google. They believe that the integration of the Gemini AI into Google Cloud and enhanced AI overviews within Google Search will boost sales. They expressed optimism about the positive effects of AI integration across Google’s platform and anticipate that a wider rollout of AI overviews will stimulate higher engagement in the core Search business, despite early challenges with the tool that led to some online criticism. They have raised their price target for Google stock from $200 to $206.
In April, Google reported a 60% increase in profits for the first quarter, aided by its AI initiatives, resulting in a surge in its stock price and boosting its market capitalization to over $2 trillion, making it part of an elite group alongside Apple, Microsoft, and Nvidia.
The successful first-quarter performance was driven by the launch of new AI products, particularly those linked to the Gemini AI offerings. Notable announcements at Google’s I/O developer conference included a futuristic universal AI assistant capable of visual interaction through smart glasses, with Google claiming that its latest Gemini AI is 20% faster than the latest version of ChatGPT.
While Wedbush analyst Dan Ives maintained a more cautious outlook on AI Overviews compared to Post and Bansal, he acknowledged that it could enhance Search monetization over time. He also pointed out that AI is already providing a boost to Google Cloud, forecasting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan analyst Doug Anmuth shared a positive outlook, naming Google as one of the firm’s top tech stock picks—alongside Uber and Amazon—while expressing enthusiasm about the progress in generative AI ahead of Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that, despite the current positive AI narrative surrounding Google, the long-term impact of AI on the company’s sales remains uncertain.