Google’s advancements in artificial intelligence are expected to enhance its second-quarter earnings, according to analysts from Wedbush, J.P. Morgan, and Bank of America. Alphabet, Google’s parent company, is set to release its earnings report after the bell on Tuesday.
Analysts from Bank of America, including Justin Post and Nitin Bansal, have raised their revenue outlooks for Google. They believe the integration of Gemini into Google Cloud and the introduction of AI Overviews in Google Search will increase sales. They noted that despite some initial issues with AI Overviews, which led to jokes and criticism online, these AI integrations will likely drive higher activity in Google’s core Search business. Consequently, they have increased their price outlook for Google’s stock from $200 to $206.
In April, Google reported a 60% increase in first-quarter profits, partly due to AI advancements. This led to a rise in its stock price, pushing its market valuation past the $2 trillion mark, joining the ranks of Apple, Microsoft, and Nvidia.
Google’s strong first-quarter performance followed the release of several new AI products under its Gemini AI offerings. At its recent Google I/O developer conference, Google unveiled a universal AI assistant capable of interacting through smart glasses. The company claims its latest Gemini AI is 20% faster than the new ChatGPT.
While Wedbush’s Dan Ives is less optimistic about AI Overviews, he acknowledges it could eventually aid in Search monetization. Ives also noted that AI is already benefiting Google Cloud, expecting a 27% increase in Cloud revenue compared to last year.
J.P. Morgan’s Doug Anmuth also expressed positive sentiments, naming Google one of the firm’s top tech stocks along with Uber and Amazon. Anmuth’s team is encouraged by the progress in generative AI ahead of Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current AI narrative for Google is positive, it remains to be seen if AI will drive long-term sales growth.