Q4 2019 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the Alpha that fourth quarter 2019 earnings Conference call.
At this time, all participants are in listen only mode.
After the speakers presentation, there will be a question and answer session.
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I would now like to hand, the conference over to your Speaker today, Ellen West head of Investor Relations. Please go ahead. Thank you Candice good afternoon, everyone and welcome to alphabet fourth quarter 2019 earnings conference call with US today, our Sundar Pichai NVS Paratte now quickly cover the safe Harbor some of the statements that we make too.
Today regarding our business performance in operations and our expected level of capital expenditures, maybe considered forward looking in such statements involve a number of risks and uncertainties that could cause actual results to differ materially for more information. Please refer to the risk factors discussed in our most recent form 10-K filed with the.
So you see.
During this call we will present, both GAAP and non-GAAP financial measures reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at a B C Dot X Y Z slash investor and now I'll turn the.
<unk> over to Sundar.
Thank you Alan and good afternoon, everyone. It's a privilege to join the call. That's the steel both alphabet than Google After four years, that's seal Google.
I'd like to start by thanking Larry and sort of be before giving all of us at Google Timeless mission endearing values and an opportunity to have an impact on the world.
There's a lot I want to covered today and I also want to leave plenty of time for any questions. You may have for me Andrew.
As you've seen in our press release be bad at new revenue disclosures to give greater insight into our business.
So what you're not a Google properties continue to drive greater cells with total revenues in 2019 of $98 billion and strong growth.
Well, it's a really pleased with two off or newer growth areas.
You tube reached $15 billion and adds revenues in 2019 growing up 36 person compared with 28.
And now has over 20 million music and premium paid subscribers and over 2 million Youtube TB paid subscribers.
Ending 2019 out of 3 billion dollar and would run rate and you'd do you have subscriptions and other non advertising revenues.
Google Cloud ended 2019 at a more than $10 billion run rate up 52% year on year, driven by significant growth in GCP.
The broad trade up GCP was meaningfully higher than that of cloud overall and GCP skilled trade accelerated some 2018 to 2090.
Before I talk about the highlights of the quarter I want to take a step back and give some early thoughts about my approach to managing alphabet and other bets.
We've always taken a long term view investing in deep computer science and technology.
Important trends like the wider adoption an application of artificial intelligence ambient computing and the moved to the cloud underlying our investments across Google and our other alphabet companies.
Our work in health care is a great example of how our investments in D. serious allows us to deliver solutions across them and their sector.
Google Cloud works with hospitals, and health care providers to securely manage their patients data.
Data that is much more secure in the cloud that in paper at college or on premises.
Our AI team said, Google also work with partners to apply to help them on their patients, but it's developing better health systems or helping the diagnosis and detection of disease.
Among that broader efforts or other bets fairly and calico are also partnering with industry leaders do use AI and cloud technologies to improve clinical trials research and drug development.
Our thesis has always been to apply these deep computer science capabilities across Google under other bets to grow and develop into new areas.
The alphabet structure allows us to have a portfolio of different businesses, but different time horizons without trying to stretch a single management team across different areas.
We'll continue to take a long term view managing the portfolio with the discipline and rigor needed to deliver long term returns.
Many or for other bets are getting to the stage, where it now makes sense for them to partner closely with other players and investors in the industry.
The most technological leadership is widely reported.
It's cars of Drummond 20 million minds across more than 25 U.S. cities.
Most now serving over 1500 monthly active writers in Metro Phoenix and continued scaling fully driverless by matching OTI traders, but driverless that he goes and charging for lease rights.
I see more looks to its evolution as a business it's focusing on strategic partnerships. For example, it's working closely with Oems and other businesses to build out ride hailing and anybody business lines.
And better leaves an example, if a company in the portfolio.
Outside investors Silver Lake and Temasek Aswell as its own board.
Well consider opportunities for some off or other bets to take some of the steps over time.
Now onto highlights from the quarter.
First search unrelated Google properties.
As I mentioned on our last call our neural network based technique for natural language processing called book is the biggest advancement in search in the last five years had no impact to 10% of searches and in Q4 beat older doubt in over 70 languages.
In maps, we're celebrating our 15th anniversary very soon and the past year be brought reliable that options to 630 million additional people in locations that previously but other than that.
We added asked many buildings to maps using ml and 2019 SBS added using all techniques in the previous sticking.
With all these improvements user growth is strong and the range of things people are doing with Google maps continues to expand as well.
The Google Assistant no helps more than 500 million monthly users across 90 countries get things done across smart sneakers, and smart displays phones TB cars in mall.
Shopping and commerce is another exciting area.
We are making strong leadership hires in this area to help build a thriving business for partner so false sizes.
For the Black Friday, and cyber Monday holiday be can be a had the largest number of baby shop 8 billion with head count growth being the largest driver of year on year growth for R&D and sales and marketing expenses.
Headcount dry spoke compensation and related facilities expenses.
After head count growth the biggest driver in R&D expenses was an increase in valuation based compensation charges in certain other bets.
Stock based compensation totaled 2.6 billion headcount was up 4803 from the third quarter and up 20% over 2008 pool.
Again, the majority of new hires were engineers and product managers.
In terms of product areas. The most sizable headcount increases were again in Google cloud for both technical and sales roles, including the impact of the look or acquisition, which closed in December.
Operating income was 9.3 billion up 13% year over year for an operating margin of 20%.
Other income and expense was 1.4 billion, which primarily reflects an increase in the market value of certain publicly traded equities as well as a non cash gain from the early transaction.
We provide more detail on the line items within Oh, I know in our earnings press release.
Our effective tax rate was your 0.3% for the fourth quarter and with 13% for the full year the fourth quarter E. T. R reflects the impact of discrete items, including the resolution of multiyear audits.
As you've seen in prior years E. T. R can vary on a quarterly data.
Net income was 10.7 billion and earnings per diluted share were $15.35.
Turning now to Capex and operating cash flow cash capex for the quarter was 6 billion, which I will discuss in the Google segment results operating cash flow was 14.4 billion with free cash flow of 8.4 billion. We ended the quarter with cash and marketable securities of approximately 120 billion.
Let me now turn to our segment financial results starting with the Google segment revenues were 45.8 billion up 17% year over year and if the of course is on a gap or floating FX basis.
Google search and other advertising revenues were 27.2 billion in the quarter up 17% year over year, reflecting ongoing momentum in mobile and desktop.
Due to the advertising revenues were 4.7 billion up 31% year on year, driven by substantial growth in direct response and ongoing healthy growth in brand advertising, which remains the largest component.
[noise] network advertising revenues were 6 billion up 8% year on year led by growth in Google AD manager.
Turning to Google cloud, including TCP, and T. sleep revenues for 2.6 billion for the fourth quarter up 53% year over year, driven by significant growth at TCP and ongoing strong growth at G suite.
The growth rate of GCP was meaningfully higher than that of cloud overall GCP growth was led by our infrastructure offerings and our data and analytics platform. We also saw strong uptake of our multi cloud and SaaS offering.
Ongoing growth in G suite continue to reflect growth in both SMB and enterprise segments, and both seat count and average revenue per seat.
The other revenues line now consists of Google play followed by hardware and you to non advertising services, mainly its subscription offerings you to premium you to music and you tube TV.
In the fourth quarter. Other revenues were 5.3 billion up 10% year over year, primarily driven by growth in you tube and play offset by declines in hardware.
You too contribution to other revenues benefited from subscriber growth across its various offerings.
We didn't play App revenues had strong growth driven by an increase in the number of active buyers.
Total traffic acquisition costs were 8.5 billion or 22% of total advertising revenues and up 14% year over year.
Total Tac as a percentage of total advertising revenues was down year over year, reflecting once again.
Favorable revenue mix shift from network to Google properties.
Google operating income was 11.5 billion up 20% versus last year and the operating margin was 25%.
Google accrued capex for the quarter was 6.6 billion, reflecting investments in data centers, followed by servers and office facilities.
Moving onto the performance of other bets for the full year 2019 revenues were 659 million up 11% versus 2018, primarily generated by fiber invariably.
Operating loss for other bets with 4.8 billion for the full year 2019 versus an operating loss of 3.4 billion in 2018.
Let me conclude with a few observations on a quarter and our longer term outlook.
Based on the strength of the U.S. dollar to date relative to the first quarter of last year. We expect continued FX headwinds again in the first quarter of 2020.
With our expanded revenue disclosures this quarter I'll talk about the revenue and investment outlook for each of these newly disclosed component parts.
First with respect to search and other advertising.
Although we don't report search revenues on a fixed FX basis, the delta between fixed and floating go growth rates at the alpha that level is a good proxy for the effect on search revenues.
Or headwind of approximately two percentage points in 2019.
At our scale, we're pleased with our rate of growth for 2019, and see ample opportunity going forward.
What's exciting for us as we look ahead at search and other Google properties is the ongoing opportunity to support users and advertisers with new adds experiences and improved measurement.
Second with respect to you to advertising.
At a year on year growth rate of more than 30% in the fourth quarter. We're pleased with the ongoing strength in opportunity at Youtube.
We see substantial continuing opportunity in direct response as well as with brand advertisers.
Sundar shared earlier the non advertising services at you to mainly from subscriptions reached a 3 billion dollar revenue run rate in the fourth quarter.
We continue to invest across you tube to grow over the long term any AD supported portion if you tube, we pay out a majority of revenues to our creators reflected in our content acquisition costs on top of that there are other expenses, including infrastructure and networking costs as well the costs of our content research.
Sensibility efforts to keep you to safe for users creators and advertisers.
We're also investing meaningfully to grow our subscriptions, which have higher content acquisition cost ratios.
Turning next to Google cloud.
We're very confident that there is an enormous opportunity here the plays to our core strengths.
We're pleased with the growth trajectory of GCP, which we see in customer momentum the growing size of the average contract and of course revenues.
The traction we're having with large customers were making multiyear commitments with us is reflected in our backlog, which ended the year at 11.4 billion substantially all of which relates to Google cloud.
Given our position as a challenger, we're investing aggressively focused on building out our go to market capabilities.
Executing against our product road map and extending the global footprint of our infrastructure focused on 21 markets and six industries.
In terms of hardware as Sundar noted in his opening remarks, we remain focused on the long term opportunity with ambient computing.
We believe our strengths in AI and software give us an advantage and providing seamless experiences to users wherever they are across multiple surfaces.
We've been investing heavily in developing our capabilities in hardware engineering as well as building out supply and physical distribution chains, and we've created a multibillion dollar revenue business in the past three years.
We're looking forward to our acquisition of fit that which will add strong capabilities and wearables and advance our vision of ambient computing for the Android ecosystem.
As we look at the near term product Road map, we continue to execute at a measured pace.
In other bets your sharpening our focus on the metrics and milestones against which capital allocation is determined and we continue to assess where external capital is additive to governance and execution.
I'll now turn to the investments, we're making in head count and in Capex to support the growth opportunities, we see across alpha that.
With respect to head count in 2019 alphabet head count grew by 20%, reflecting investment in key areas such as cloud.
Overall, we expect the growth rate of head count to be slightly higher in 2020 due to the combined impact of investment in priority areas plus the decision to move certain center functions in house as well as from the plant impact of that that that acquisition.
S.P.C. as a reminder, our full year equity refresh grants are made to employees. During the first quarter of 2020, and you will see the step up in our first quarter results.
In terms of Capex in 2020, we intend to increase our investment in both technical infrastructure and office facilities versus 2019.
Within technical infrastructure at the investments in particular support ongoing demand for machine learning across our business as well as for cloud search ads and you too.
Relative to 2019, we anticipate relatively more spend on servers, then on data center construction.
At this scale of investment we remain very focused on driving efficiency through fleet optimization and tight management of our supply chain.
Finally on capital returns in the fourth quarter, we repurchased $6.1 billion of shares which was more than doubled the amount of repurchase in the fourth quarter of 2018.
As of yearend, we had $21 billion remaining in the program and are focused on executing on the remaining authorization at a pace that is at least consistent with what you saw in the fourth quarter.
In conclusion, we remain very confident about the opportunities across alphabet and in our ability to continue to deliver at the steady pace we've shown.
So darn I will now take your questions.
Thank you as a reminder to ask a question you want me to press Star then one on your telephone.
Withdraw your question. Please press the pound key.
But any background noise, we ask that you. Please meet your line. Once your question has been stated.
And our first question comes from Heather Bellini from Goldman Sachs. Your line is how often.
Hi, Thank you very much on Barnes group, and I guess I I'm sure you're gonna here, that's a million times night, but thank you. So much for the enhanced disclosure I think this is the best Google color alphabet call I've I've been on since I've covered the company. So so thank you again, you've given us a lot of stuff here.
Just wanted to focus a little bit of ardent GCP and my comments that you made and.
Hi, there if you want to think about that's for Google Cloud collectively are just for GCP just given the revenue run rate that you're at yeah. How do we think about D. The gross margin profile of this business is it fair to look at some of the other cloud players when they were disclosing similar.
Run rates to get a sense what their gross margins were first there were a reason why your business might look slightly different. Thank you so much again.
Oh, Thank you for those comments, so Ah, yes, first and foremost are obviously I'm really pleased with with the momentum near TCP had fantastic revenue momentum in the fourth quarter and as as we noted it's growing it up and meaningfully higher pace than than Google Cloud overall terms of your margin question. You know look I think our our view.
As obviously the competitive dynamics in the cloud market are very different today, we are investing aggressively given the opportunity, which I tried to make clear in in opening comments.
Given the opportunity we see in the momentum we're having we we've accelerated our investment in our go to market team and as we've talked about before we've set a goal to triple the size of the Salesforce. We're also I'm focused on building out our product road map and extending the global footprint of our infrastructure and I'll leave that the forecasting to you.
Thank you.
Thank you and your next question comes from Eric Sheridan from you've Yes. Your line is now open.
Thanks, so much maybe two ports.
I Wonder if you first a lot of innovation company put on display over the past your I'll talk did her should afford commentary section about sustainability of growth and outperformance going forward. What are you. Most excited about when you see the company trying to a Y O Y proves consumer utility along with what continues to drive.
Growth in the various segments of the business that would be number one and true Bruce maybe for you talked about variability of revenue last quarter going into Q4, but unless I missed that I don't think theme word again in Q4, well when you were expecting a terms of variability in Q4 and any color you could give on how that played out or how we should.
Thank you about variability revenue going forward. Thanks, so much.
<unk> I think.
Overall, I presume you mean across everything we do and if that's the case, a you know I mean I am.
Trends, we're seeing a and you've been investing on it for a while but you know applying it I'm actually driving use cases to users. So for example.
You know using AI to dramatically improve a natural language processing to make come personal for social so it's better is that kind of opportunity I'm excited by you know when I look at we do see a lot of commercial experiences across our properties speed search or you tube.
On the opportunity to create a better experience there and handspring more value to our users, that's something which we see as a big opportunity.
And across our businesses speed you tube cloud play our hardware. In addition to search you know we are you know seen strength in a lot of de serious and we share a common technological approach across all of them and so that gives us a synergistic way to approach the city as well.
And then on your second question, you know <unk> <unk> at our scale, where we're pleased with the rate of growth in 2019 here in search and our ads business overall, and we do see ample opportunity ahead. When we talk about variability of revenue is the way we've talked about it in the past.
Very much holds true, which is where we we don't manage for any particular quarter, we manage focused on what's in the best.
That's for users and and with a lot of testing that goes around it and so.
Really the point as there will be variability and and we're focused on continued the continued long term opportunity and we do see that opportunity I'm the ads opportunity to be significant you know apart from the secular shift to digital 'em. We continue to be very focused on the the benefit from better measurement better.
Battle every better user experience our view is that all helps grow the addressable market, but there will be variability over time, because we're very focused on what's in the right long term interest.
Thank you.
Thank you and your next question comes from Doug and met from JP Morgan. Your line is now open.
Great. Thanks for taking the questions I'm, one for Sundar and one for Ruth Sungard first just hoping you could talk more about Google cloud great to see the 10 billion dollar run rate I'm. Just curious if you can help gauge the progress over the past year than where do you think the biggest areas of differentiation why I'm in an increasingly competitive space.
And then Ruth can you just give some of your latest thoughts on balancing growth and profitability across the Google segment and other bets as you enter this year do you see additional opportunities to drive increased profitability without impacting the long term potential of the business. Thanks.
Doug on cloud you know I think.
Maybe maybe a few thoughts from a small to progress we made last year and talk about the differentiation, which you asked about as well.
You know definitely under Tom as this leadership, a you know I think we Oh.
Clearly focused on six industry verticals across to anyone markets and so doubling down on those so foods.
Brit, bringing in a lot of new products and compliance certification, so effectively expanding but time.
Which we sort of.
With mentioned the team is on track to Triple a our sales force in three years, including bringing in a number of seen yesterday do colliers and supplementing it with a channel partnership program.
I think.
The progress have seen in customer focus with a customer success organization and the contracting framework have all been a great progress for us.
Overall, you know.
Every time, we are in especially in one of these larger deals. They are effectively looking for a technology partner. So differentiation is not just what we bring to table in terms of cloud a that'd be of differentiate differentiated capabilities.
But in many cases, it's what we bring us Google. So if you take an area like health care all the investments we make in health care across Google and in some cases alphabet.
If you look at Sabre the partnership we can bring to them across our you know experience working traveled verticals as well. So I think Oh, you know and over time I also think <unk> AI based industry specific solutions. We are working on all will end up being a differentiating factor slow.
And in terms of your second question investing for growth and how we balanced growth and profitability you know that the approach to capital allocation and the pace of investing and continues to be guided by the same three drivers that we've talked about previously first and.
And is investing to support the long term earnings growth and the opportunities that we see there second we do remain focused on optimizing investments within each product area and then third as we've talked about in prior calls is investing to support operational excellence and that includes things like driving efficiencies in our.
Technical infrastructure, which I spoke about you know when we look at the biggest investment areas within Google We as we've talked about already on this call I'm continue to be focused on investing to support the growth that we see it starts with search in a while also investing to build new businesses and we've talked.
About a couple of them already today cloud, it's clearly an area, where we're investing aggressively in hardware. We've been investing heavily you know by developing our capabilities in hardware engineering as well as building out supplying physical distribution chains, and then and you too as I mentioned in opening comments watch.
We need to build out our subscription services its still in the early days, there and we're making a sizable investment to build it out taking a long term view here.
So yeah, we are leaning into investing for long term growth that's been a core principle here and remains such a while looking at where can we optimize within portfolios and where can operational efficiencies be additive.
Great. Thank you though.
Thank you and our next question comes from Brian Nowak from Morgan Stanley. Your line is now open.
Thanks for taking my question I've I've to just to center I thought your 2020 focal points really helpful. Creating the most helpful products for everyone and then the most trusted experience for users [noise].
I was curious kind of focus in those comments on payments and you to even though a lot of payment strategies over the last couple of years. So talk about what types of investments are products. You think you need to really remove friction and drive better payment adoption and then on the you tube side. If you sort of look at how people are using you to now from an engagement perspective.
[noise] what types of changes do you foresee you need to make an order really making them more helpful products driving engagement, even higher on a that you do platform. Thanks.
Well, Brian thing on on the on the payment side.
You know clearly you know I spoke earlier about the kind of experience as people see across our properties, including people do come a with an intent to discover alone and commercially engages wall and when they're looking to transact payments ends up playing a critical role a sort of less friction you habit.
Tends to work better so they've been really focused on doing bad and getting more off our uses set up in the right state a we've heard a lot of traction with our payments product over the past.
18 months, a we had a tremendously successful launch in India from which we view learned.
A lot of features some of your bringing that and we are revamping our payments products globally, and so I'm excited by that drill out which is coming up in 2020, I think that will make the experience better.
On the you tube side, you know wall, but I guess your questions about you know.
How are uses engaging with the <unk> or all of you know all our user metrics are very strong the global in nature and increasingly be seen we see new were voted goes beginning to grow a small so you tube is working horizontally.
Well at scale and for US, it's making sure as it ecosystem. It works better sort of the content. There. They experience. This there are improving RSV ticker condoms responsibility work seamlessly, which makes more content creators engage and makes it more valuable part product for advertisers as.
Well.
But also supplementing the content you see there with the other types of you know exercising things be merchandising ticket sales you know when we make it contextually relevant what we've done in search and so trots over time, if he can bring that how do you tube NBC an opportunity I think I think that sets us up although for the long.
Uh huh.
Great. Thanks.
Thank you and your next question comes from Brent <unk> from Jefferies. Your line is now open.
Thanks, Ruth and in North America was there anything that was abnormally unusual a Facebook had cited some weakness in North America. It looks like your North America number it was relatively weak versus the last four years is or was there any nominally that we should be aware of thank you.
Thanks for that so that the regional break down also reflects product mix within regions. The U.S. here on your growth rate does reflect a decline in hardware revenues relative to what was a fairly strong hardware revenue growth rate in Fourq you 18.
How much more to call out than that.
Thank you.
Your next question comes from Stephen Chin from Credit Suisse. Your line is now open.
Thank you so sundar I guess some of the more cross product lines synergies are showing up in an integrated software and hardware for the stuff like the pixel book.
You've come up through the ranks or Google, So you're going to be pretty sensitive to the various interest across various teams, but you know we're wondering what you may be looking to do break down I guess, what might have been more of a side note effort.
And googles history. Thanks.
You know I think you know I spoke about execution at scale and and so for US that means you know you have these product areas, which are focused on the users, but VR setting up the teams, which cut across all the studios and make sure. They can bring the synergies and work at scale. So last year, we said.
The core infrastructure team, which looks at things like you know how to us they use a journey work across what does a shared infrastructure ingenious can use so they'd be don't reinvent the wheel in multiple areas, how can be calm and be deployed <unk> across all these products. So I think that's.
That's been a good example of bringing teams together onto the big area, but it'd be invested like back to breakdown silos is our partnerships are we set up a global partnerships team and our ability to bring a common Google perspective to our big Global partners. It's how does a strike me.
Any new partnerships I mentioned Activision Blizzard as an example, and they work can be very synergistic with cloud as well to my point earlier when people engaged with us on cloud, they're looking for their interest in a bigger digital transformation across the board Google Assistant is a great example of because.
We are focused on the user experience cuts across a several off for a product areas as being a great mechanism by which we can break down cycles is small, but but it's a great question I spent a lot of time on it.
Thank you.
Thank you and our next question comes from Dan Salmon from BMO capital markets. Your line is now open.
Good afternoon, everyone I had two questions one clarifying one for Ruth and then maybe a big picture one for Sundar Ruth you a distinguished between a group of brand advertising and direct response on you tube. A those comments were very clear I just want to follow up and after just how you make that distinction between Brandon direct response is that a different pricing.
Models at the presence of AD revenue share with a creator are both would just be curious on that distinction.
And then two sundar the Big picture one you know we have heard others in the ecosystem talk about headwinds from targeting growing.
Certainly there are a regulatory changes it also apply to you.
You've made some some changes to various Google advertising platforms and of course or.
The owner of two of the largest most important platforms and chrome and the and the Android operating system I could ask your billion things on that last one, but what I really like to ask is the big picture question. If we roll up these sort of things for your total advertising business.
How important are changes here to your topline growth are you seeing.
Notable headwinds from these types of changes in the ecosystem as well thanks.
So on the first one thing we have a again this quarter talked about brand and and direct response and as we've talked about in prior quarters.
Brand is growing at a healthy pace and remains the largest component of you tube ads.
Direct response is growing continues to grow at a very substantial growth. The distinction here is the formats for you know in direct response, we're letting brands insert a tailored call to action in the video AD such as signing up for a newsletter scheduling an appointment or down lighting downloading an app or booking a trip things are those sort that's why I.
It's it's that direct response category.
Oh and on a broader questions about headwinds you know <unk> you know it's something.
You know, we always need to take a look at you know we.
Try to stay focused on.
Uses and our partners and be realized for these things to scale. You know you need to make sure. The ecosystem is working well and and so we had engaged in these issues and and and we anticipate then structurally work on them early on so its how we broadly approach these things and so there's nothing no.
Double to call out other than you know a you know there will be continued you know changes cindy's ecosystems, and our ability to anticipate and adopt husky a key to the years ahead.
Thank you.
And our next question comes from Justin Post from Bank of America Merrill Lynch. Your line is now okay. Great. Thank you I'd like to ask a whole bigger picture things on the new disclosure. So so first on you tube monetization schumi of about 2 billion users, it's about seven or $8 per user just wondering how you feel about that monetization level given.
All that you said, you're seeing there and is there should never get room to raise that when you compare to other social networks and then secondly on the cloud backlog, a very strong number 11.4 versus our I asked cash.
Revenue rate just wondering about how strong the new deals have been that you've signed the last six months sounds like really good traction there and then the profitability of these deals how you feel about that thank you.
You don't of course around a you tube you know I do think bidders a lot of opportunity ahead, you're right. It's a block from working at scale.
I think a root spoke a little bit of about Brian and direct response, having direct response is a huge growth area for us and and increasingly I think a when you look at the fact that people are consuming a lot of goods and services spawn after experiencing Youtube how can we create better commerce Expedia.
This is also is a big opportunity for us so looking across I think a that it is a more room a significantly more room over the long time on monetization levels and so I think we see that as a.
Big opportunity in our investing for it.
On cloud are definitely you know we are increasingly doing a much larger deals and and you know these deals can sometimes span beyond cloud us wall and they can touch a many areas. So as an example, if youre an automotive company.
Oh, we can be talking to you a cross cloud Android auto in some cases, they know they all happened to be strong platforms partners on the advertising side as well. So these are large deals and and you know we do want to build these in a sustainable way so that became so the partner well and so profitability as being something they're very focused on.
On a swap.
You know just to add a little more to that.
Where is the.
He 11.4 billion a backlog number it is you know for US we view it as a way to quantify the traction on that we're having and as you know well in the enterprise face. These these tend to grow overtime and profitability as such comes across the the cohorts. However at the point that we were trying to make and have.
Had a couple of times here on the call is we are investing aggressively in crop cloud overall, given the opportunity that we see in the momentum were having and we'll continue to do so.
Thank you.
Thank you and our next question comes from Youssef Squali from Suntrust. Your line is how often.
Okay, great. Thank you two quick ones first through has a shortened holiday season and much of an impact on your search business in North America, and then Sundar as you talk about automation machine learning how much of advertisers search spend is now on auto bidding and how do you think smart buildings effective is affecting.
Spending growth and pricing thank you.
So on the holiday shopping season that there's really nothing to highlight there what we find is their seasonal puts and takes in any given period, so really nothing to know.
[noise] on.
I don't have specific numbers here, but do you know the tide here, but you don't effectively we do see significant traction in these areas and advertisers are leveraging the features we have we are bringing your tier I beat smart bidding murder bidding Oh, there's tremendous traction.
With our advertisers here.
Thank you.
Thank you and our next question comes from Kevin Ramsey from Evercore. Your line is now open.
Hi, Thanks for taking my question.
Primarily for Sundar.
As you think about the risk profile, if some of your businesses like Waymo barely in health care, how do you manage those risks, which you know likely in a scenario where autonomous cars have some action or something like that having those in house and the perhaps brand damage that could do to Google versus what you could do if those were entirely separate entered.
Prizes I know, they're all held on to the need for an umbrella, but just sort of big picture. How you think about managing that risk over time. Thank you.
Thanks, Kevin you know we are you know as I spoke earlier in that amongst you know part of the reason we are making sure.
We are investing in a proper governance structures. So if you don't try to scale as a management across these important duty of some of these are.
You know have a regulatory aspects to it we are for some of these bets this ball on but at least a great example, we've we've.
You know brought an outside investors people with expertise and putting a proper boats structures and governance for these so I think those all help and you know will continue to.
You know a you know evaluate these on a pretty Arctic basis, and bring that rigor and discipline, but I do think also but gives us a more flexible framework. If you will to both have the independents when we need a but where we can have a common chad synergies like our AI investments bring better.
A basketball.
Thanks.
Thank you and your next question comes from Mark Mahaney from RBC. Your line is now often.
Hi, This is Ben on for Mark. Thanks for taking the question Ruth I, just kind of want to double click on something you said before in terms of other bets kinda like a sharpening focus on yes. The allocation there was that kind of does that kind of signaling signaling more of the same or is that kind of.
Potentially maybe prioritizing.
Investments.
More towards like share buybacks.
Stuff like that as opposed to like base I'm trying to ask our should we expect greater rush rationalization and the other bets segment going forward is it more of the same thanks a lot.
So what is a it was added to saying is that when we look at the other bets and execution, we've talked over time about measuring them against specific metrics and milestones operating business technology.
Financial performance and we and we look at that as we calibrate the pace of investment the approach to investments and we're continuing to do that we're putting up a sharper focus on it as Sundar indicated a looking at <unk>, where does it make sense it too.
Work with the extra capitals, we deal with their early as an example, but the bigger point as we continue to invest for the long term and when we look at our capital.
Return approach, it's very consistent with what we've talked about previously the primary use of capital continues to be.
To support long term growth in Google and in other bets and then it's about 'em strategic investments and on top of that return of capital to shareholders.
Thank you.
Thank you enter next question comes from Ross Sandler from Barclays. Your line is how often.
Two questions.
Google segment margin looked really strong in the fourth quarter for Google first time, a mix shift actually helped you guys from margin perspective. So rude can you just talk about how how much was up margin increase year on year was from the hardware business dropping off versus improving or elsewhere.
As you afford you mentioned that headcounts come to accelerate the 2020 <unk> isn't going to school year your view or just kind of more of the study you kind of increase for the second question.
On on you tube.
The discussion here about direct response in part from the opportunity there what percent of <unk> I was a advertisers are or barring surge only versus a Boeing surgeon you too.
Stage and.
It looks like from your new disclosure that you do you still are worried a little bit and fourth quarter and any color on on what's driving out relative to the full year and I wouldn't you can grow through like you.
Okay I'm, so taking the first part of that and in terms of the the operating margin in the fourth quarter. There were a number of discrete items in the fourth quarter last year until 2018. So that did result in a favorable Google Opinc here in your comparison for this year and as you said the other cost to sales does.
Reflect lower expenses related to hardware in Q4 in particular versus.
Last year, but I think the main point to leave you with is that we do intend to continue to invest aggressively to support growth in the areas that we already talked about quite a bit on this call in search and cloud in hardware and in Youtube.
In terms of headcount you know I tried to break it out in my closing comments that it starts with those areas, putting head count, but behind the areas, where we're investing up for the long term and then we have a couple of additional factors that that are somewhat.
You know expected to boost the year on year growth rate. Yeah. One is bringing some support in house that opex neutral on any other is that that that acquisition.
In terms of the third part of your question I'm, just trying to recall that the.
Did the in terms of or the mix sudden I'm not sure there's much to add there.
Thank you under final question comes through line of Colin Sebastian from Baird. Your line is Allison.
Thank you I guess first just given the focus and new leadership team in Commerce was wondering if could talk a little bit it's more about the opportunities you see for innovation there at the transactional part of the funnel and then as a quick follow up on the acceleration in GCP beyond the size of the deals where their particular product areas like.
Query or something else worth worth calling out that might have inflected to drive that acceleration.
Great on on Commerce, I'm really excited bins ready you see here. He brings a lot of a experience and you mentioned the transactional part of off the funnel and I think it's maybe a better he brings a lot of experienced given us prior work.
But we definitely see opportunity to improve in the world user experience in terms of how we present, our roussos, the visual nature of fed making that experience more delightful and when people are interested in something you know how do you make it.
More seamless.
To complete the transaction and bringing in deep partnerships.
With merchants and retailers to making that happen. So excited about the opportunity there and you know and that's where we are investing.
On GCB you know we did see you know it's been a lot to do with you know bringing to bear a all the resources we have an engaging.
Well on these deals and execution that there has been great and it's definitely we see strong traction in data analytics and so our strength bears a company, it's definitely a contributing significantly aswell us our overall leadership in <unk>.
Thank you.
Thank you and that concludes our question and answer session for today I'd like turn the conference back over to Ellen West for any further remarks, thanks, everyone for joining US today, we look forward to speaking with you again on our first quarter 2020 conference call. Thank you and have a good evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
[noise].
Good day, ladies and gentlemen, and welcome to the alphabet second quarter 2019 earnings call.
At this time, all participants are in listen only mode.
Later, we will conduct a question and answer session and instructions given at that time.
If anyone should require operator assistance. Please press Star then zero on your Touchtone telephone.
I'd now like turn the conference over to Ellen West Head of Investor Relations. Please go ahead.
Thank you good afternoon, everyone and welcome to alphabet second quarter 2019 earnings conference call with US today, our Sundar Pichai in Reais per at now quickly cover the safe Harbor some of the statements that we make today regarding our business performance in operations and our expected level of capital expenditures.
Maybe considered forward looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially for more information. Please refer to the risk factors discussed in our most recent form 10-K filed with the FCC.
During this call we will present, both GAAP and non-GAAP financial measures a reconciliation of non gap to GAAP measures is included in todays earnings press release, which is distributed and available to the public through our Investor Relations website located at a B C Dot X Y Z slash investor and now I'll turn.
Call over to Sundar.
Thanks Alan.
You do was an exciting quarter Google.
We made several big announcements today, you Youtube spend cast and Google marketing life.
There are all part of her broadvision double the more helpful. Google for everyone.
When we say everyone be mean uses developers creators partners.
Advertises and all the customers so far growing cloud business.
And the communities be coal.
From the beginning Googles mission has been to organize the world's information and make it universally accessible and useful.
Over the years, we've evolved from a company that helps people find answers to accompany that helps you get things done.
Today I would share how we're approaching this work.
Building them more helpful. Google starts with advancing our core information mission.
In Q2, we have made a number of improvements to our founding product search.
We redesigned our mobile search page and broader popular full coverage feature to search to better organized new services.
We had also integrating augmented reality into search.
So you see your searching for and when you shoes online you can view, the shoes and treaty or even super imposed them onto your wardrobe to see if they match.
Thanks to advancements in AI, we have making significant improvements to the Google assistant.
The next generation assistant and process stick with up to 10 times faster, making it easier to multi task compose emails and even work offline.
But features like duplex on the bad Das systems will soon be able to help uses book rental cars and by movie tickets.
If you are searching for the fastest be home Google maps will now tell you when you buses delayed or how Pat do you an extreme movie.
We have rolled this out to people in 200 cities worldwide.
Google maps can also help people stay safe in times of crisis.
Last month, we added more visual information and the new navigation warning system to help you understand better natural disaster is and better and the speed, but maybe had it.
Building a more helpful. Google for everyone means that everyone should be able to axis and enjoy a products.
That's why we're applying the latest advances in AI to dramatically improve experiences for people with disabilities.
One example of this is captions, which make condon more accessible to the almost 500 million people in the world, who are death or hard of hearing.
In Android Q, we can now add automatic like options to any media bleeding on your phone such as videos podcast and voicemail.
We had also developing technology for the next billion uses coming online in places like India, Brazil, Indonesia.
Yesterday, we introduced the gallery go up it's a way for people living in low connectivity areas to manage their photos and videos while off line.
Google photos continues to be one off our most popular and delivered province, now with over 1 billion monthly users.
We are excited by the potential of gather to go to bring these benefits to the next billion uses.
Building for everyone also means ensuring that privacies equally available to everyone.
In Q2, we announced privacy improvements to give uses clear choices more controller on their data.
We are making privacy controls more easily accessible.
Expanding our popular in called me dual mode, the mobs and adding new auto delete controls.
And we continue to challenge the notion that products need more data to be more helpful.
For example, the invented a new technique called Federated learning that allows us to train him autos and make product smart or without rodado, leaving your device.
To make products work, even harder for you we have continued to invest in our hardware business, bringing together the best of Googles hardware software anyway.
But I O. We introduced some new additions to our hardware lineup, including picks of three and picks up to you excel.
By taking advantage of for leading software capabilities. We can offer uses a premium phone experience at a much lower price point.
With the launch of picks up three in me overall pick city unit sales in Q2 grew more than two X year over year.
In addition to Verizon under Google store, we successfully expanded our distribution to T. Mobile sprint you assume either spectrum mobile and traditional partners, which is greatly diversified our sales footprint into you whats.
Finally, it also pleased to the picks up three launch was met with our highest net promoter score ratings today.
We had also doubling down on creating a helpful home, bringing all the for home products together under the Miss Brent.
In Q2, we launched the nest hub in 12 additional countries.
Demand across our helpful home products continues to increase as we expand into new markets.
Our new Google nest hub, Max a wall voice activated smart display pod by the Google Assistant will be available later this summer.
Stay tuned for even more on hardware this fall.
Beyond hardware be continued to develop the open platforms and ecosystems that push computing forward, such as Android googly and cool.
<unk>, we showed some exciting improvements to Android Q.
The first operating system to support Fiveg.
Include support for portable phones.
And that's nearly 50, a beats focused on security and privacy.
Including more transparency and control or location data you shared with UBS.
And we continue to feel the excitement from users developers and publishers following the announcement of for new gaming platform stadia <unk>.
We recently announced pricing availability and over 30 games coming to stadia in time for the consumer launch in November.
Another area, where we are investing deeply you too.
Everybody uses come to you tube to learn new things.
As a result Youtube has become one of the world's most accessible educational platforms.
We see strong growth in a number of radius.
Creators continued to build engage fan bases on you too.
Channels with more than 1 million subscribers grew by 75% year over year.
Thousands of channels of double that total monthly revenue by using new monetization products like Super chat, China memberships and merge.
And be building momentum with a subscription services you give music and you do premium now available in over 60 countries up from play markets at the start of 28.
I'd Brandcast, we introduced two important changes that help advertisers reach new audiences with premium content.
First you you Dubourg Cds movies and vitamins.
We'll soon be made available for free supported by a it's.
Second Youtube TV with its somebody plus channels will be accessible as a standalone lineup and Google preferred.
As we continue didn't miss in the platform responsibility remains a top priority.
One significant change we made in Q2 was to update our hate speech policy.
And we continue to be vigilant about removing harmful condon quickly that's good.
In the first quarter alone be removed more than 8 million videos that bite either in our community guidelines.
The vast majority of those videos, a flat by machines and remote before getting a single view.
We're also working to raise a high quality content and support or creators who are our next generation media businesses.
These are a few of the many investments we've made to predict the community. The work is ongoing and be a committed to it.
Moving from Youtube broader advertising platforms.
At Google marketing life, we introduced new AD formats, such as discover yachts, which offer a new visually rich mobile first AD experience across Google properties.
We also announced a unified shopping experience and Universal chopping car all of which helped to me Google more shoppable.
We also announced school travel a new centralized travel destination, where people can plan on organize all aspects of the next strip all in one place.
From booking flights and accommodations to planning activity.
Now onto our cloud business.
Q2 was another strong quarter for Google Cloud, which reached an annual revenue run rate of over $8 billion and continues to grow at a significant piece.
Customers are choosing glu cloud for a variety of reasons.
Reliability uptime are critical retailers like lows are leveraging the cloud as one of the important tools to transform their customer experience and supply chain.
Customers need flexibility to move to cloud in their own be.
Daus announced earlier this year provides advanced security an open architecture.
<unk> multi in hybrid cloud and we're on.
That's important to many companies, including financial services customers like pitches, PC and new clients such as Keith.
Scalable data management and I'll dig solutions are on or the strength of Google cloud.
Vodafone is using cloud to drive real time customer network analytics, and bright inside a leading health care platform for connected devices and drugs.
Ah uses our solutions to improve security and compliance.
Finally, Google clouds, AI and most solutions or also helping healthcare organizations like Sanofi accelerate drug discovery, and Asuncion improved health care experience and outcomes.
We continue to build our world class club deemed helps the border customers and expand the business I know looking to triple our sales force over the next few years.
Finally to support a rapidly growing cloud customer base and all of Google services globally. The broke ground on Threed data centers and launched a new Osaka cloud region. The seven in Asia Pacific.
We also announced plans for a new cloud region in Las Vegas or someone in the United States.
Lastly be on investments in products, we are investing significantly in the communities where we operate.
In Europe, we recently announced a 1 billion euro data century investment in the Netherlands asked with US the opening of our Google Safety Engineering Center in Munich, Germany.
And right here at home, we announced a 1 billion dollar investment and housing across the Bay area to help address the chronic shortage of affordable housing.
Earlier this week, we invested $50 million in housing Trust Silicon Valley Stick fund, which furthers our goal to help community succeed over the long term and expands access to housing for those who needed <unk>.
Finally, I'm excited that Google is an official supporter of the Olympic and Paralympic Games, Tokyo 2020.
Particularly special since that's where we opened our first international office back in 2001.
I have the games, we are working with the city of Tokyo to ensure Japanese businesses can better so new customers on health was it is make the most of that time, they're using products like search maps and translate.
A Google we feel incredibly privileged to have the opportunity to help so many people every day in moments big and small.
There are many reasons to be optimistic about the dedication technology staking from the applications of the guy to address disease to the potential of quantum computing to deepen our understanding of the world.
I want a pen googlers around the world for another great quarter with that I'll hand, it over to <unk>.
Thank you sooner in the second quarter total revenues of 38.9 billion were up 19% year on year end up 22% in constant currency.
Once again, our results were driven by ongoing strength in mobile search in particular as well as you tube and cloud.
I will begin with a review of results for the quarter on a consolidated basis for alphabet focusing on year over year changes I will then review results for Google followed by other bets and will conclude with our outlook. We will then take your questions.
Let me start with a summary of alphabet consolidated financial performance for the quarter.
Our total revenues of 38.9 billion reflect an acceleration in both reported and constant currency revenue growth across all regions compared with the first quarter.
Details of our results by geographic region are available in our earnings press release.
Turning to profitability on a consolidated basis total cost of revenues, including Tac, which I will discuss in the Google segment.
Was 17.3 billion up 25% year on year.
Other cost of revenues on a consolidated basis was 10.1 billion up 35% year over year, primarily driven by Google related expenses.
The biggest contributor was costs associated with our data centers and other operations, including depreciation followed by content acquisition costs, primarily for you tube and mostly for our advertising supported content, but also for our newer subscription businesses you to premium and you to TV.
Which have higher cap as a percentage of their revenues.
This line was also impacted by growth in hardware costs associated with the launch of our line of mid tier pixel Threeg smartphones.
Operating expenses were 12.5 billion with head count growth, it's the largest driver across each of R&D sales and marketing and DNA.
The biggest increase once again was an R&D expenses, reflecting our focus on product innovation.
Growth in sales and marketing expenses also reflects an increase in advertising and promotional expense primarily for the launch of our pixel three a line up.
Stock based compensation total 2.8 billion headcount was up 4187 from last quarter and consistent with prior quarter's the majority of new hires were engineers and product managers.
In terms of product areas, the most sizable headcount increases where again in cloud for both technical and sales roles.
Operating income was 9.2 billion up 13% year over year, excluding the impact and the E. C. Fine in the second quarter of last year for an operating margin of 24%.
Other income and expense was 3 billion, reflecting sizable gains which are primarily unrealized from investments made by capital GE GE v. and more broadly at alpha that.
We provide more detail on the line items within away any in our earnings press release.
Net income was 9.9 billion in earnings per diluted share were $14 in 21 cents.
Turning now to Capex in operating cash flow.
Cash capex for the quarter was 6.1 billion, which I will discuss in the Google segment results.
Operating cash flow was 12.6 billion with free cash flow of 6.5 billion.
We ended the quarter with cash and marketable securities of approximately 121 billion.
Let me now turn to our segment financial results starting with the Google segment revenues were 38.9 3.8 billion up 19% year over year in terms of the revenue detail Google sites revenues were 27.3 billion in the quarter up 18% year over year.
In terms of dollar growth results were led again by mobile search with a strong contribution from you to followed by desktop search.
Network revenues were 5.3 billion up 9% year on year continuing to reflect the performance of the primary drivers of growth within network, namely Google AD manager followed by Admob.
Other revenues for Google were 6.2 billion up 40% year over year fueled by cloud with an ongoing strong contribution from play.
With in cloud growth in GCP was once again the primary driver of performance was strong customer demand for our compute and data analytics products.
C suite continues to be a valued set of productivity and work transformation apps with results benefiting from both new pricing and seat growth.
Plays a results were driven by strong growth in the number of active buyers.
Hardware benefited from the successful launch of our pixel three a smart phones.
We provide monetization metrics in our earnings press release to give you a sense of the price and volume dynamics of our advertising businesses.
Total traffic acquisition costs, or 7.2 billion or 22% of total advertising revenues and up 13% year over year.
Total Tac as a percentage of total advertising revenues was down year over year, reflecting primarily a favorable revenue mix shift from network to sites.
The sites Tac rate increased year over year, primarily due to the impact of the ongoing shift to mobile which carries higher attack offset by the growth in tax free sites revenues primarily from year to.
In Q2, the network tack rate declined year on year, primarily due to a favorable product mix shift.
Operating income was 10.4 billion up 16% versus last year and the operating margin was 26.8%.
Accrued capex for the quarter was 6.9 billion, reflecting investments in office facilities and Datacenters followed by servers.
Let me now turn to and talk about other bets.
Revenues were 162 million primarily generated by fiber in their early with an operating loss of 989 million.
No. It a couple of key recent accomplishments.
Waymo now has over 1000 active writers participating in Waymo, one and has reached 10 billion miles driven and simulation.
Waymo also announced that it has entered into an exclusive partnership with Renault Nissan to explore driverless mobility services for passengers and deliveries in France and Japan.
Loon was once again able to step in and provide connectivity in the aftermath of a natural disaster. After the recent earthquake in Peru. This fall as previous deployments of living after hurricanes in frederico and floods in Peru.
Let me now conclude with some comments about our longer term outlook.
Based on the strength of the U.S. dollar to date relative to the third quarter of last year. We expect continued FX headwinds again in the third quarter.
As a reminder.
FX headwinds affect both revenues and operating income given the majority of our expenses are in the U.S.
Turning to revenues, we're pleased with the ongoing momentum in our revenue growth.
Especially on a base of nearly $150 billion in revenues over the last 12 months.
With respect to sites revenues the strength in the second quarter again reflects our ongoing innovation in part from the benefits of applying machine learning.
We remain confident about the ongoing opportunities that.
And within other revenues once again cloud was the largest driver within other revenues and the third largest driver of revenue growth for alphabet. Overall in fact in a second quarter of 2019 is cinder mentioned the annual run rate for cloud revenues was over $8 billion.
And cloud continues to deliver significant growth.
In terms of our hardware business, we were pleased with the reception of the pixel three a line up of mid tier smartphones in the second quarter and look forward to the fourth quarter launch of our newest devices some of which we showcased at Io.
Turning to profitability with regard to Google operating expenses, the second quarter results. Once again reflect our ongoing commitment to investing for the long term.
At this point, we expect that our 2019 head count growth rate will be closer to the 2018 rate in other words slightly higher than we originally forecast for a couple of reasons.
Strategically we are increasing our hiring in cloud in our incorporating the impact of the look or acquisition, which we expect to close before the end of this year.
And operationally, we're taking steps to optimize workforce deployment by moving certain customer support functions in house, which is both opex neutral and enhances operational effectiveness.
As a reminder, head count additions tend to be seasonally higher in Q3, because that is when we bring on new graduates.
In terms of sales and marketing consistent with prior years, we expect sales and marketing to be more heavily weighted to the back half of the year to support the holiday season.
In other bets, we continue to invest meaningfully for the long term opportunity we see.
Turning to Capex and capital allocation.
To give you more insight into our investment in capital expenditures I will discuss the two major components of Google Capex separately.
First the majority of our Google Capex is what we referred to was technical infrastructure, which consists of our investments for compute storage and networking requirements and includes data center land and construction servers and network equipment.
The second category of Capex is for our office facilities, including acquisitions ground up development projects and related building improvements.
In the last couple of years within Google Capex on average approximately 70% was for technical infrastructure and 30% was for office facilities.
Both the split between the two components and year on year growth rates can vary significantly from quarter to quarter due primarily to the timing a sizable purchases of office facilities.
For example in Q1 technical infrastructure was about 80% of Google Capex, whereas in Q2, it accounts for about 60% due to the purchases of office facilities, we made in the quarter.
As we discussed on the fourth quarter call. We believe there are two important factors when considering our pace of Capex investing.
First we expect the overall growth rate will moderate quite significantly for the full year 2019 versus 2018.
Second in terms of the mix within technical infrastructure, we expect to see more of an uptick in 2018 and data center investments relative to servers in contrast to the ranking in 2018.
Growth in technical infrastructure is designed to support in particular, our efforts in machine learning across our businesses as well as to support growth in cloud search and you too.
With respect to capital allocation, our primary use of capital continues to be to support organic growth in our businesses, followed by retaining flexibility for acquisitions and investments.
We complement these growth drivers with a return of capital.
As we indicated in our press release today, our board has authorized the repurchase of up to an additional $25 billion of arc ATSI capital stock.
In conclusion, we are confident about the opportunities ahead and continue to invest thoughtfully for the long term, we will now take your questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press star and then the number one key on your Touchtone telephone.
Question has been answered you wish trim of yourself from the Q. Please press the pound <unk> and given that any background noise. We ask that you. Please mute your phone. After your question has been stated.
And our first question comes from Eric Sheridan from you'd be S. Your line is now open.
Thanks for taking my question.
Really appreciate all the additional commentary and disclosure in the remarks I.
And that's really helpful. Sundar, maybe for you one bigger picture question a lot of innovation on the product side or in the early part of this year now those products are going to start getting rolled out in the back this year and into 2020 can you give us a little bit of additional color on what sort of the key investments you're making some of the key themes you're trying to drive after into.
Terms of pushing the organization to collaborate on product launches and leveraging the strength within Google and then the second part of the question would be as you lower friction for consumers on the product side. What are you hearing from advertisers on the monetization tried about how those products might resonate on the monetization.
So much.
Thanks, Eric Oh on in terms the seamless mens you know we still continue.
You know we have viewed being focused on our investments in <unk>. So that continues to be kind of a foundational investments you're making a across the board, including getting a lot of for engineers are trained on AI techniques. It's about cross the boat. So it's it's an important area we are focused on.
And and you know, making sure you know digging deeper to push our products to be more helpful. A you know SIMPAS. The main theme by which we are evaluating a everything we do beyond but you know be it a bit Oh, you know the focus on it.
Cloud has been a big part of it are continuing to scale up Youtube, a including being focused on content responsibility. These at all or some of the keep things we're doing a and of course, a you know deep focus on search and assist and being a core part of everything we do.
In terms of the work we're doing on consumers and the impact does on monetization and I do think they go hand in hand.
Yes, we are making the experience better for consumers, including on products like discover so just getting getting information to them more seamlessly when they need it.
<unk> all you know tend to have a commercial aspect of the light in Denver and uses that are interested in it and us have always seen them go hand to hand, and so a you know taking a long term view I think oh, who that was made on the monetization side as well.
Building a bit on that question and the impact from some of the announcements that you've seen from US you know those comment a bit on the impact from a Google marketing lives at Synta referenced at the outset, Yeah. I think what's notable here is that every year at GML, we announce any changes to products and features and most adds product launches or introduce.
Used in phases as advertisers initially experiment with new formats, and so as a result, I'm the new products. It and now that were announced at GML typically are adopted overtime and so just wanted to add in here because while we're excited about the new adds products, we announced a G.M.L. last quarter given they offer great new a user experiences across new.
Mrs. We don't view this year's slate of launches differently from introductions that need in previous years.
Thank you.
Thank you and our next question comes from Douglas Anmuth from JP Morgan. Your line is now open.
Great. Thanks for taking my question I'm, just hoping Ruth you could talk a little bit more just about the accelerating growth that you saw into Q relative to the the slowdown that we saw in one Q. It seems certainly in the previous quarter to skew more to the Google search side, then you too but it was just hoping you could probably a little more clarity on maybe how the product change.
Is that you've talked about in the past played out across one Q into Q.
And then just under on a user privacy and control over data that was certainly is a key theme across the multiple events into Q. You just talk about how you balance those initiatives as you're rolling out products going forward. Thanks.
I'm so starting first with the the this strength insights revenue you know that the strength we talked about here. This quarter reflects the same underlying trends that we discussed previously.
And I tried to really called that out and in opening comments in part is the benefit from applying machine learning to both the user and advertiser experience and it really just you know on echoing a lot of what we've said.