Google’s upcoming second-quarter earnings report is expected to shine due to recent developments in its artificial intelligence (AI) initiatives, according to analysts from Wedbush, J.P. Morgan, and Bank of America. The parent company, Alphabet, is scheduled to announce its earnings after market close on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have raised their revenue projections for Google, crediting the company’s integration of the Gemini AI into Google Cloud and enhanced AI Overviews in Google Search for potential sales growth.
In a research note, Post and Bansal expressed confidence in the positive impact of AI integrations across Google’s ecosystem, suggesting that a wider implementation of AI Overviews could lead to increased activity in the core Search business. This optimism comes despite some challenges during the initial rollout of AI Overviews, which faced scrutiny for errors and misleading information. They adjusted their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% increase in profits for the first quarter, driven in part by its AI advancements. This led to a surge in its stock price, elevating the company’s market capitalization to over $2 trillion, placing it alongside tech giants like Apple, Microsoft, and Nvidia.
The positive first-quarter results were attributed to a series of new AI product launches stemming from Google’s Gemini AI initiatives. Highlights from the Google I/O developer conference included a universal AI assistant capable of interacting through smart glasses. Google claims that its newest version of Gemini AI outperforms the latest ChatGPT by being 20% faster.
Wedbush analyst Dan Ives expressed a more cautious stance regarding AI Overviews compared to his counterparts but indicated that it might contribute to future revenue increases in the Search segment. He also noted that AI is already benefiting Google Cloud, projecting a 27% revenue increase year-over-year for the cloud services segment.
Similarly, J.P. Morgan analyst Doug Anmuth reaffirmed positive prospects for Google, listing it as one of the firm’s top technology stocks alongside Uber and Amazon. He highlighted the encouraging advancements in Generative AI as the market looks forward to Alphabet’s earnings announcement.
However, Raymond James analyst Josh Beck cautioned that despite the current upbeat narrative surrounding AI’s impact on Google, its long-term influence on sales remains uncertain.