Analysts from Wedbush, J.P. Morgan, and Bank of America are optimistic that Google’s AI advancements will positively impact its second-quarter earnings, with Alphabet set to release its earnings report on Tuesday after market close.
Following an earnings beat by General Motors, there is growing speculation about the potential benefits for Tesla and other companies in the “Magnificent 7” group. Analysts from Bank of America and Wedbush have upgraded their revenue projections for Google. Bank of America’s Justin Post and Nitin Bansal attribute this optimism to the successful integration of the Gemini AI into Google Cloud and AI Overviews in Google Search, which they believe will enhance sales.
In a recent research note, they stated, “We remain positive on growing AI integrations across Google’s ecosystem and believe a wider implementation of AI Overviews will increase engagement in the core Search business,” despite some initial challenges when the tool faced criticism online for inaccuracies. They have raised their price target for Google stock from $200 to $206.
In April, Google reported a remarkable 60% profit surge in the first quarter, largely fueled by AI initiatives, resulting in a significant increase in its stock price and pushing the company’s market capitalization beyond $2 trillion, joining tech giants like Apple, Microsoft, and Nvidia.
Google’s strong performance in the first quarter came after numerous new AI products were introduced as part of its Gemini AI offerings. At its recent Google I/O developer conference, the company unveiled a futuristic universal AI assistant capable of interacting through smart glasses. Google claims that its latest Gemini AI is 20% faster than the most recent version of ChatGPT.
While Wedbush’s Dan Ives expressed some caution regarding AI Overviews, he acknowledged in a note that these developments could support Search monetization in the long run. Ives noted that AI is already contributing to Google Cloud’s growth, predicting a 27% year-over-year increase in Cloud revenue.
J.P. Morgan’s Doug Anmuth shared similar positive views, listing Google as one of the firm’s top tech stock picks alongside Uber and Amazon, citing encouragement from the advancements in GenAI before Alphabet’s second-quarter earnings report.
However, Raymond James analyst Josh Beck cautioned that while the current perception of AI at Google is favorable, it remains uncertain whether these innovations will lead to sustained sales growth over time.