Q1 2024 Alphabet Inc Earnings Call
Operator: Welcome, everyone. Thank you for standing by for the Alphabet First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Welcome everyone. Thank you for standing by for the alphabet first quarter 'twenty 'twenty four earnings conference call.
At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Operator: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. I would now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Please go ahead.
To ask a question during the session you will need to press star one on your telephone I would now like to hand, the conference over to your Speaker today, Jim Friedland Director of Investor Relations. Please go ahead.
James H. Friedland: Thank you. Good afternoon, everyone. And welcome to Alphabet's first quarter 2024 earnings conference call. With us today are Sundar Pichai, Philipp Schindler, and Ruth Porat. Now, I'll quickly cover the safe harbor.
James H. Friedland: Thank you good afternoon, everyone and welcome to alphabet first quarter 2024 earnings conference call with US today are Sundar, Pichai, Philipp Schindler and Ruth threat.
James H. Friedland: Now I'll quickly cover the safe Harbor.
James H. Friedland: Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement.
Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.
Actual results could differ materially please refer to our forms 10-K, and 10-Q, including the risk factors, we undertake no obligation to update any forward looking statements.
James H. Friedland: During this call, we will present both GAAP and non-GAAP financial measures. A 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 www.abc.xyz.com. Our comments will be on year-over-year comparisons unless we state otherwise, and now I'll turn the call over to Sundar. Thank you
During this call we will present, both GAAP and non-GAAP financial measures a 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 forward slash investor our comments will be on year over year compare.
Persons unless we state otherwise.
And now I'll turn the call over to Sundar.
Sundar Pichai: Thank you, Jim and Hello, everyone.
Sundar Pichai: And hello everyone. It was a great quarter, led by strong performance from Search, YouTube, and Cloud. Today, I want to share how we are thinking about the business and the opportunity more broadly, of course, that's heavily focused on AI and. Then I'll take you through some highlights from the quarter in cloud, YouTube, and beyond. Now, let's discuss our momentum and strategy. Taking a step back, it took Google more than 15 years to reach $100 billion in annual revenue.
Sundar: He was a great quarter led by strong performance from search Youtube and cloud.
Sundar: Today I want to share how we are thinking about the business and the opportunity more broadly.
Sundar: Of course, that's heavily focused on AI and search.
Sundar: Then I'll take you through some highlights from the quarter and cloud Youtube and beyond.
Let's discuss our momentum and strategy.
Taking a step back it took Google more than 15 years to reach $100 billion in annual revenue.
Sundar Pichai: In just the last six years, we've gone from $100 billion to more than $300 billion in annual revenue. Of course, search continues to power that, as you see in our Q1 results. But in addition, we expect YouTube overall and the cloud to exit 2024 at a combined annual run rate of over $100 billion.
And just the last six years, we've gone from $100 billion to more than 300 billion in annual revenue.
Of course search continues to power that as you've seen our Q1 results.
But in addition, we expect Youtube overall and cloud to exit 2024 at a combined annual run rate of over $100 billion.
Sundar Pichai: This shows our track record of investing in and building successful new growing businesses. Now, let's look at how well we are positioned for the next wave of AI innovation and the opportunities ahead. There are six points to make.
This shows our track record of investing in and building successful new growing businesses.
Sundar: Now, let's look at how well we are positioned for the next wave of AI innovation and the opportunity ahead there.
Sundar: There are six points to make one research leadership to infrastructure leadership through innovation and search for our global product footprint.
Sundar Pichai: One, research leadership. Two, infrastructure leadership. Three, innovation and search. Four, our global product footprint. And five, velocity in execution.
Velocity and execution six monetization paths.
Sundar Pichai: Six, the monetization path. First, our foundation of research leadership. We've been an AI-first company since 2016, pioneering many of the modern breakthroughs that power AI progress for us and for the industry. Last week, we further consolidated teams that build AI models under Google DeepMind. This will help simplify development and establish a single access point for our product teams as they build generative AI applications with these models. The teams are making rapid progress developing Gemini and other models. In February, we rolled out Gemini 1.5 Pro, which shows dramatic performance enhancements across a number of dimensions. It includes a breakthrough in long-context understanding, achieving the longest context window of any large-scale foundation model yet.
First our foundation of research leadership.
In an AI first company since 2016 pioneering many of the modern breakthroughs that power AI progress for us and for the industry.
Sundar: Last week, we further consolidated teams that build AI models under Google Deep mine.
This will help simplify development and establish a single access point for our product teams as they build generated by AI applications with these models.
The teams are making rapid progress developing Gemini and other models in February we rolled out Gemini 1.5, pro which shows dramatic performance enhancements across a number of dimensions.
It includes a breakthrough in long context understanding Ah <unk>.
Leaving the longest context window of any large scale foundation model yet.
Sundar Pichai: Combining this with Gemini's native multimodal understanding across audio, video, text, code, and more, it's highly capable. We are already seeing developers and enterprise customers enthusiastically embrace Gemini 1.5 and use it for a wide range of things. Beyond Gemini, we have built other useful models, including our Gemma Open models, as well as Imagine visual models, and others, and Infrastructure Leadership. We have the best infrastructure for the AI era. Building world-leading infrastructure is in our DNA, starting in our earliest days when we had to design purpose-built hardware to power circuits. Our data centers are some of the most high-performance, secure, reliable, and efficient in the world.
Sundar: Combining this with Gemini native multimodal understanding across audio video text Gordon Moore, it's highly capable.
Sundar: We are already seeing developers and enterprise customers and <unk> embraced Gemini 1.5, and use it for a wide range of things.
Beyond Gemini via built other useful models, including our gym opened models as well as imagine visual models and others.
Sundar: Second infrastructure leadership.
We have the best infrastructure for the AI era building.
Sundar: Building World, leading infrastructure is in our DNA starting in our earliest days when we had to design purpose built hardware to power search.
Our data center, so some of the most high performing secular reliable and efficient in the world.
Sundar Pichai: They've been purpose-built for training cutting-edge AI models and designed to achieve unprecedented improvements in efficiency. We have developed new AI models and algorithms that are more than 100 times more efficient than they were 18 months ago. Our custom TPUs, now in their fifth generation, are powering the next generation of ambitious AI projects. Gemini was trained on and is served using TPUs.
Sundar: They have been purpose built for training cutting edge AI models and designed to achieve unprecedented improvements in efficiency.
Sundar: We have developed new AI models and algorithms that are more than 100 times more efficient than they were 18 months ago.
Our custom Gpus now in their fifth generation are powering the next generation of ambitious AI projects.
Sundar: Jim and I was trained on underserved using Gpus.
Sundar Pichai: We are committed to making the investments required to keep us at the leading edge of technical infrastructure. You can see that from the increases in our capital expenditure. This will fuel growth in the cloud, help us push the frontiers of AI models, and enable innovation across our services, especially in search. AI innovations in search are the third and perhaps the most important point I want to make. We have been through technology shifts before, to the web, to mobile, and even to voice technology.
Sundar: We are committed to making the investments required to keep us at the leading edge and technical infrastructure you can see that from the increases in our capital expenditures.
This will fuel growth in cloud help us push the frontiers of AI models and enable innovation across our services, especially in search.
AI innovations in search or the third and perhaps the most important point I want to make.
Sundar: We have been through technology shifts before to the web to mobile and even to wise technology.
Sundar Pichai: Each shift expanded what people could do with search and led to new growth. We are seeing a similar shift happening now with generative AI. For nearly a year, we've been experimenting with SGE in search labs across a wide range of queries, and now we are starting to bring AI overviews to the main search engines of space.
Each shift expanded what people can do with search and led to new growth.
We are seeing a similar shift happening now would generate of AI for nearly a year, we have been experimenting with SG and searched labs across a wide range of queries and.
Sundar: And now we are starting to bring AI all of us to the main searches. So speech, we are being measured in how we do this focusing on areas, where G&A I can improve the search experience, while also prioritizing traffic to websites and merchants.
Sundar Pichai: We are being measured in how we do this, focusing on areas where GenAI can improve the search experience while also prioritizing traffic to websites and merchants. We have already served billions of queries with our generative AI features. It's enabling people to access new information, to ask questions in new ways, and to ask more complex questions. Most notably, based on our testing, we are encouraged that we are seeing an increase in search usage among people who use the new AI overviews, as well as increased user satisfaction with the results. And with Circle2Search, people can now circle what they see on their Android screens; ask a question about an image or object in a video and get an AI overview with Lens.
Sundar: We have already serve billions of queries without generative AI features.
It's enabling people to access new information to ask questions in new ways and to ask more complex questions.
Sundar: Most notably based on our testing we are encouraged that we are seeing an increase in <unk> usage.
Sundar: Among people, who use the new AI all of us as well as increased user satisfaction with the results.
Sundar: And with circle to search people can now circle, what they see on their Android screens.
Ask a question about an image or object in the video and get an AI overview with less.
Sundar Pichai: Fourth, our global product footprint, BeyondServe. We have 6 products with more than 2 billion monthly users, including 3 billion Android devices. We have 15 products with half a billion users, and we operate across 100+ countries. This gives us a lot of opportunities to bring helpful Gen AI features and multi-modal capabilities to people everywhere and improve their experience. We have brought many new AI features to Pixel, Photos, Chrome, Messages, and more. We are also pleased with the progress we are seeing with Gemini and Gemini Advance through the Gemini app on Android and the Google app on iOS.
Fourth our global product footprint beyond search.
Sundar: We have six products with more than 2 billion monthly users, including 3 billion Android devices.
15 products have half a billion users.
And we operate across 100 plus countries.
Sundar: This gives us a lot of opportunities to bring helpful. Jenny I features and multimodal capabilities to people everywhere and improve their experiences.
We have brought many new AI features to pixel photos chrome messages and more.
Sundar: We're also pleased with the progress we are seeing with Gemini and Gemini advance through the Gemini App on Android and the Google App on iOS.
Sundar Pichai: 5th Improved Velocity and Execution; We've been really focused on simplifying our structures to help us move faster. In addition to bringing together our model building teams under Google DeepMind, we recently unified our ML infrastructure and ML developer teams to enable faster decisions, Smarter Compute Allocation, and a Better Customer Experience. Earlier this year, we brought our search teams together under one leader, and last week, we took another step by bringing together our platforms and devices team.
Theft improved velocity and execution.
Sundar: We've been really focused on simplifying our structures to help us move faster.
Sundar: In addition to bringing together our model building teams under Google Deep mine, we recently unified our MLP infrastructure and ml developer teams to enable faster decisions.
Sundar: Compute allocation and a better customer experience.
Earlier this year, we brought our search teams together under one leader and last week, we took another step, bringing together our platforms and devices teams.
Sundar Pichai: The new combined team will focus on delivering high-quality products and experiences, bolstering the Android and Chrome ecosystems, and bringing our best innovations to partners fast. We also remain focused on long-term efforts to durably re-engineer our cost structure. You can see the impact of this work reflected in our operating margin improvement. We continue to manage our headcount growth and align teams with our highest priority areas. This speeds up decision making, reduces layers, and enables us to invest in the right areas.
The new combined team will focus on delivering high quality products and experiences.
Bolstering, the Android and chrome ecosystems, and bringing our best innovations to partners faster.
We also remain focused on long term efforts to Durably reengineer our cost base.
Sundar: Can see the impact of this work reflected in our operating margin improvement.
Sundar: We continued to manage our head count growth and aligned teams with our highest priority areas.
This speeds up decision, making radios as layers and enables us to invest in the right areas.
Sundar Pichai: Beyond our teams, we are very focused on cost structures, procurement, and efficiency, and a number of technical breakthroughs are enhancing machine speed and efficiency, including the new family of Gemini models and a new generation of TPUs. For example, since introducing SGE about a year ago, machine costs associated with SGE responses have decreased 80% from when they were first introduced in labs driven by hardware, engineering, and technical breakdowns.
Beyond our teams we are very focused on our cost structures procurement and efficiency and a number of technical breakthroughs are enhancing machine speed and efficiency.
Including the new family of Gemini models, and a new generation of Gpus.
Sundar: For example, since introducing ESG about a year ago machine costs associated with SCE responses have decreased 80% from main first introducing lapse driven by hardware engineering and technical breakthroughs.
Sundar Pichai: We remain committed to all of this work. Finally, our monetization path. We have clear paths to AI monetization through ads in the cloud as well as subscription. Philipp will talk more about new AI features that are helping advertisers, including bringing Gemini models into performance maps. Our cloud business continues to grow as we bring the best of Google AI to enterprise customers and organizations around the world, and Google One Now has crossed 100 million paid subscribers, and in Q1, we introduced a new AI premium plan with Gemini Advent. Okay, those are the six points.
We remain committed to all of this work.
Sundar: Finally, our monetization path, we have clear paths to AI monetization through ads and cloud as well as subscriptions.
Philip will talk more about new AI features that are helping advertisers, including bringing Gemini models into performance Max.
Sundar: Our cloud business continues to grow as we bring the best of Google AI to enterprise customers and organizations around the world.
And Google One now has crossed 100 million paid subscribers and in Q1, we introduced a new AI premium plan with Gemini advanced.
Speaker Change: Okay. Those are the six points. So now let me turn to quarterly highlights from cloud and Youtube and a bit more detail.
Sundar Pichai: So now let me turn to quarterly highlights from Cloud and YouTube in a bit more detail. In Cloud, we have announced more than 1,000 new products and features over the past eight months. At Google Cloud Next, more than 300 customers and partners spoke about their generative AI successes with Google Cloud, including global brands like Bayer, Sentas, Mercedes-Benz, Walmart, and many more. Our differentiation in the cloud begins with our AI hypercomputer, which provides efficient and cost-effective infrastructure to train and serve models.
Speaker Change: In cloud, we have announced more than 1000, new products and features over the past eight months.
Speaker Change: At Google Cloud next more than 300 customers and partners spoke about the regenerative AI <unk> assist with Google cloud.
Speaker Change: Including global brands like Bear sent Us Mercedes Benz Walmart and many more.
Our differentiation in cloud begins with our AI hype a computer.
Which provides efficient and cost effective infrastructure to train and serve models today.
Sundar Pichai: Today, more than 60% of funded Gen AI startups and nearly 90% of Gen AI unicorns are Google Cloud customers, and customers like PayPal and KakaoBrain are choosing our infrastructure. We offer an industry-leading portfolio of NVIDIA GPUs along with RTPUs. This includes TPU-V5P, which is now generally available, and NVIDIA's latest generation of Blackwell GPUs.
Speaker Change: Today more than 60% of funded Gen AI startups, and nearly 90% of <unk> unit costs, our Google cloud customers.
Speaker Change: And customers like Paypal and cacao brain are choosing our infrastructure.
We offer an industry, leading portfolio of Nvidia Gpus, along with RTP use.
Speaker Change: This includes <unk>, which is now generally available and Nvidia <unk> latest generation of Blackwell Gpus.
Sundar Pichai: We also announced Axion, our new Google design, an ARM-based CPU. In benchmark testing, it performed up to 50% better than compatible x86-based systems. On top of our infrastructure, we offer more than 130 models, including our own models, open-source models, and third-party models. We made Gemini 1.5 Pro available to customers as well as Imagine 2.0 at Cloud Next, and we shared that more than 1 million developers are now using our generative AI across tools, including AI Studio and Vertex AI.
Speaker Change: We also announced axion or new Google design and arm based CPU in benchmark testing. It has performed up to 50% better than comparable X 86 based systems.
Speaker Change: On top of our infrastructure, we offer more than 130 models, including our own models open source model and third party models, we made Gemini 1.5 pro available to customers as well as imagine to point out at cloud next.
Speaker Change: And we shared that more than 1 million developers are now using our generative AI across tools, including AI studio and vertex AI.
Speaker Change: We spoke about how customers like Bristol Myers Squibb, and Etsy can quickly and easily build agents and connect them to their existing systems. For example, discover financial has begun deploying gen AI driven tools to its nearly 10000 call center agents to achieve faster resolution times for customers.
Sundar Pichai: We spoke about how customers like Bristol Myers Squibb and Etsy can quickly and easily build agents and connect them to their existing systems. For example, Discover Financial has begun deploying GenAI-driven tools to its nearly 10,000 call center agents to achieve faster resolution times for customers. Customers can also now ground their Gen AI with Google Search and their own data from their enterprise databases and applications. In Workspace, we announced that organizations like Uber, Pepperdine University, and PennyMac are using Gemini in Google Workspace, an AI-powered agent that's built right into Gmail, Docs, Sheets, and more.
Speaker Change: Customers can also now ground, there Jen AI with Google search and their own data from the enterprise databases and applications.
Speaker Change: In workspace, we announced that organizations like Uber Pepperdine University, and Penny Mac are using Gemini and Google workspace are.
Speaker Change: High powered agent, that's built right into Gmail docs sheets anymore.
Speaker Change: We also announced Google bits, a new application to create stories and short video format.
Speaker Change: And we introduced <unk> for meetings and messaging and Gemini security for workspace.
Speaker Change: Customers are choosing workspace, because they have deep trusting our powerful security and privacy features.
Sundar Pichai: We also announced Google Vids, a new application to create stories in a short video format, and we introduced Gemini for meetings and messaging and Gemini security for work. Customers are choosing Workspace because they have deep trust in our powerful security and privacy. Our cloud business is now widely seen as the leader in cyber security. I saw this firsthand when I went to the Munich Security Conference in February.
Our cloud business is now widely seen as the leader in cyber security.
Speaker Change: This firsthand when I went to the Munich Security Conference in February.
Cyber security analysts are using Gemini to help spot threats summarized intelligence and take action against attacks, helping companies like American family insurance aggregate and analyze security data in seconds instead of days.
Turning next to Youtube, which continues to grow and lead in streaming.
Speaker Change: We announced that on average viewers are watching over $1 billion of Youtube content on TV daily.
Sundar Pichai: Cyber Security Analysts are using Gemini to help spot threats, summarize intelligence, and take action against attacks. Helping companies like American Family Insurance aggregate and analyze security data in seconds instead of days, next to YouTube, which continues to grow and lead in streaming. We announced that on average, viewers are watching over 1 billion hours of YouTube content on TV stages. AI experiments like DreamScreen will give anyone the ability to make AI-generated backgrounds for YouTube Shorts.
Speaker Change: AI experiments like Dream screen will give anyone the ability to make AI generated backgrounds for Youtube shots.
Speaker Change: And on subscriptions, which are increasingly important for Youtube.
Speaker Change: We announced that in Q1, Youtube surpassed 100 million music and premium subscribers globally, including trailers.
Speaker Change: And Youtube TV now has more than 8 million paid subscribers.
Speaker Change: Finally in other bets.
Speaker Change: Most fully autonomous service continues to grow ridership in San Francisco, and Phoenix with high customer satisfaction, and we started offering paid rates in Los Angeles and testing right only trips in Austin.
Philipp Schindler: And on subscriptions, which are increasingly important for YouTube, we announced that in Q1, YouTube surpassed 100 million music and premium subscribers globally, including trials, and YouTube TV now has more than 8 million paid subscribers. Finally, in other bets, Waymo's fully autonomous service continues to grow ridership in San Francisco and Phoenix with high customer satisfaction, and we started offering paid rides in Los Angeles and testing rider-only trips in Austin. Overall, it was a great quarter, and there's more to come.
Overall, it was a great quarter and theres more to come.
Speaker Change: <unk> is in less than three weeks, followed by brand cast and Google marketing live.
Speaker Change: I wanted to thank our employees around the world who are at the heart of this progress and who continue to focus on building innovative products helpful services, and new opportunities for businesses and partners around the world. Thank you Philip.
Philip: Thanks, Sundar and hi, everyone.
Philip: Google services revenue of $70 billion were up 14% year on year search and other revenues grew 14% year on year led again by solid growth in the retail vertical with particular strength from APAC based retailers, which began in the second quarter of 2023.
Philip: Youtube ads revenues were up 21% year on year driven by growth in both direct response and brand.
Network revenues declined 1% year on year.
Philipp Schindler: I-O is in less than three weeks, followed by Brandcast and Google Marketing Live. I want to thank our employees around the world who are at the heart of this program and who continue to focus on building innovative products, helpful services, and new opportunities for businesses and partners around the world. Thank you.
Philip: In subscriptions platforms and devices year on year revenues increased 18% driven again by strong growth in Youtube subscriptions.
Philip: Let's not talk about a few highlights from the quarter from a product innovation and advertising performance perspective first it bears repeating that AI innovation across our ecosystem is core to every aspect of our product portfolio from targeting bidding creative measurement and across campaign types.
Philipp Schindler: Thanks, Sundar, and hi everyone. Google's services revenue of $70 billion was up 14% year-on-year. Search and other revenues grew 14% year-on-year, led again by solid growth in the retail vertical, with particular strength from APAC-based retailers, which began in the second quarter of 2023. YouTube ads revenues were up 21% year-on-year, driven by growth in both direct response and Network revenues declined 1% year-on-year. In subscriptions, platforms, and devices, year-on-year revenues increased 18%, driven again by strong growth in YouTube subscriptions.
Speaker Change: We've talked about whole solutions like smart bidding use AI to predict future at conversions and their value in helping businesses stay agile and responsive to rapid shifts in demand and.
Speaker Change: And how products like broad match leverage llm's to match ads to relevant searches and help advertisers respond to what millions of people are searching for this is foundational.
Speaker Change: As advances accelerate in our underlying AI models, our ability to help businesses use us at speed and scale and drive ROI, just keeps getting better we're especially.
Speaker Change: Really excited about the doors Jenny is opening for creative capabilities, helping deliver on the premise of getting the right AD to the right user and the right moment.
Speaker Change: Look at performance Max and February raw Gemini into Pemex, It is helping cure rate and generate text and image assets a business can meet pemex asset requirements instantly.
Philipp Schindler: Let's now talk about a few highlights from the quarter from a product innovation and advertising performance perspective. First, it bears repeating that AI innovation across our ads ecosystem is core to every aspect of our product portfolio, from targeting, bidding, creative, measurement, and across campaign types. We've talked about how solutions like Smart Bidding use AI to predict future ad conversions and their value in helping businesses stay agile and responsive to rapid shifts in demand, and how products like BroadMatch leverage LLMs to match ads to relevant searches and help advertisers respond to what millions of people are searching for. This is foundational.
Speaker Change: <unk> is available to all U S advertisers and starting to roll out internationally in English and early results are encouraging.
Speaker Change: Advertisers using Pemex asset generation are 63% more likely to publish a campaign with good or excellent that strength.
Speaker Change: And those were improved their pemex at strength to excellent 6% more conversions on average.
Speaker Change: We're also driving improved results for businesses opting into automatically created assets, which are supercharged with Jenny I.
Speaker Change: Those adopting AC AC on average 5% more conversion instead of some of our cost per conversion in search and performance Max campaigns.
Speaker Change: And then there's dimension advertisers are loving its ability to engage new and existing customers and drive purchase consideration across our most immersive visual touch points like Youtube shorts, Gmail and discover.
Philipp Schindler: As advances accelerate in our underlying AI models, our ability to help businesses find users at speed and scale and drive ROI just keeps getting better. We're especially excited about the doors GenAI is opening for creative capabilities, helping deliver on the premise of getting the right ad to the right user in the right moment. For example, look at Performance Max.
Speaker Change: Hollywood film and television studio Lionsgate partnered with Horizon media to test what campaign type will deliver the most ticketing page views for its the hunger games pellet of songbirds and snakes phone.
Speaker Change: Over a three week test dimension was significantly more efficient versus social benchmarks with an 85% more efficient CPC and 96% more efficient cost per page view Lionsgate has since rollout dimension for two new titles.
Philipp Schindler: In February, we rolled Gemini into P-MAX. It's helping curate and generate text and image assets so businesses can meet P-MAX asset requirements instantly. This is available to all U.S. advertisers and is starting to roll out internationally in English, and early results are encouraging. Advertisers using PMAX asset generation are 63% more likely to publish a campaign with good or excellent ad strength, and those who improve their PMAX ad strength to excellent see 6% more conversions on average.
Speaker Change: We're also bringing new creative features to demand Gen earlier. This month, we announced new generated image tools to help advertisers create high quality assets and a few steps with a few simple prompts this will be win for up leveling visual storytelling and testing creative concepts more efficiently.
Speaker Change: And then Theres, obviously search generative experience, which sundar talked about.
I laugh that innovation and the user experience and search has historically opened up new opportunities for advertisers. We saw this when we successfully navigated from desktop to mobile we're continuing to experiment with new AD formats, including search and shopping ads alongside search results and SG.
Philipp Schindler: We're also driving improved results for businesses opting into automatically-created assets, which are supercharged with GenAI. Those adopting ACAC see an average 5% more conversions at a similar cost per conversion in Search and Performance Max campaigns and DemandGen. Advertisers are loving its ability to engage new and existing customers and drive purchase consideration across our most immersive and visual touchpoints like YouTube, Shorts, Gmail, and Discover. Hollywood film and TV studio Lionsgate partnered with Horizon Media to test what campaign type would deliver the most ticketing page views for its The Hunger Games: Ballad of Songbirds and Snakes film. Over a three-week test, DemandGen was significantly more efficient versus Social Benchmarks, with an 85% more efficient CPC and a 96% more efficient cost per page view. Lionsgate has since rolled out DemandGen for two new titles.
Speaker Change: And we shared in March how folks are finding at either above or below the SG results helpful.
Speaker Change: We're excited to have a solid baseline to keep innovating on and confident in the role SG, including F will play in delighting users and expanding opportunities to meet user needs.
Speaker Change: Which brings me to search and our strong performance in the first quarter.
Speaker Change: Q1 retail was again the top contributor our focus remains on driving profitability and growth for retailers, helping them optimize the digital performance for both online and offline as well as innovate across our shopping at merchant experiences.
Speaker Change: Highlights include.
Speaker Change: Continued upsides for retailers, leading into agile budget and bidding strategies across search pemex or both.
Speaker Change: Take home goods retailer, Ikea, who leaned into Google store sales measurement to understand its total omnichannel revenue opportunity across search.
By measuring two three times more revenue than using value based bidding solutions to bid to its omnichannel customers.
Speaker Change: Here drove a significant increase in omni revenue in Q1 and is now scaling this strategy globally.
Speaker Change: We also expanded local inventory ads into 23 countries, helping drive shopper confidence in offline sales.
Philipp Schindler: We're also bringing new creative features to DemandGen. Earlier this month, we announced new generative image tools to help advertisers create high-quality assets in a few steps with a few simple prompts. This will be a win for up-leveling visual storytelling and testing creative concepts more efficiently. And then there's obviously the search-generative experience, which Sundar talked about. I'll add that innovation in the user experience on search has historically opened up new opportunities for advertisers. We saw this when we successfully moved from desktop to mobile.
Speaker Change: Retailers can convert turned into action by showcasing in store availability pricing pickup options and more all in one ad format.
Speaker Change: Moving to Youtube.
Speaker Change: Last quarter I went deep into our strategy. It all starts with creation, which drives viewership which leads to monetization.
Speaker Change: Few updates to build on some of our remarks.
Speaker Change: First creation, which is all about giving creators the tools to create amazing content grow their audiences and build their businesses and.
Speaker Change: In 2023 more people created content on Youtube than ever before and a number of channels uploading shorts year on year grew 50%.
Philipp Schindler: We're continuing to experiment with new ad formats, including search and shopping ads alongside search results in SGE. And we shared in March how folks are finding ads either above or below the search results helpful. We're excited to have a solid baseline to keep innovating on and confident in the role SGE, including ads, will play in delighting users and expanding opportunities to meet user needs. Which brings me to Search and our strong performance in the first quarter.
Speaker Change: We also hit a new milestone with $3 million plus channels and our Youtube partner program.
Speaker Change: Recently shared that <unk> has paid out more than any other creator monetization platform.
Speaker Change: Including over $70 billion to creators artists and media companies over the last three years.
Speaker Change: From our viewers perspective, what's time across Youtube continues to grow with strength in both short term CTV. According to Nielsen Youtube has been the leader in U S. Streaming watch time for the last 12 plus months.
Philipp Schindler: In Q1, retail was again a top contributor. Our focus remains on driving profitability and growth for retailers, helping them optimize digital performance for both online and offline, as well as innovate across our shopping and merchant experiences. Highlights include Continued upsides for retailers leading into agile budget and bidding strategies across search, PMAX, or both. For example, take Home Goods Retailer IKEA, who leaned into Google's store sales measurement to understand its total omni-channel revenue opportunity across search.
Speaker Change: In the first quarter living room benefited from a combination of strong watch time growth innovation and the user and advertiser experience and a shift in brand advertising budgets from linear TV to Youtube.
Speaker Change: Viewers are watching Youtube, because they expect to excess everything in one place across screens and formats.
Speaker Change: <unk> creators life sports breaking news educational content movies music and more and.
Speaker Change: And advertisers continue to lean into <unk> audience is they can't find elsewhere.
Philipp Schindler: By measuring 2.3 times more revenue and using value-based bidding solutions to bid for its omni-channel customers, IKEA drove a significant increase in omni-revenue in Q1 and is now scaling this strategy globally. We also expanded local inventory ads into 23 countries, helping drive shopper confidence and offline sales. Retailers can convert intent into action by showcasing in-store availability, pricing, pickup options, and more, all in one ad format. Moving to YouTube. Last quarter, I went deep into our strategy.
Speaker Change: Which brings me to monetization.
Speaker Change: We're pleased with our Q1 performance across both our AD supported and subscription offerings.
Speaker Change: Sundar covered subscription growth on the AD front direct and brands were both strong this quarter.
Speaker Change: Shorts monetization continued to improve with shorts ads supported on mobile tablet living room, and desktop and available to both performance and brand advertisers.
Speaker Change: In the U S. The monetization rate of shorts relative to interim viewing has more than doubled in the past 12 months, including a 10 point sequential improvement in the first quarter alone.
Speaker Change: Just last week, we introduced new ways for brands to get the most out of their shorts ads with new lineups on Youtube select including sports beauty fashion and lifestyle and entertainment.
Philipp Schindler: It all starts with creation, which drives viewership, which leads to monetization. Here are a few updates to build on Sundar's remarks. First, creation, which is all about giving creators the tools to create amazing content, grow their audiences, and build their businesses. In 2023, more people created content on YouTube than ever before, and the number of channels uploading shorts year-on-year grew 50%. We also hit a new milestone with 3 million plus channels in our YouTube Partner Program.
Speaker Change: Youtube advertisers increasing brand lift is one of the core goals in Q1, we saw strong traction from the introduction of a pause at pilot on connected Tvs and new non interrupt if AD format that appears when users pasta organic content <unk>.
Speaker Change: Initial results showed that pause ads are driving strong brand lift results in our commanding premium pricing from advertisers.
Speaker Change: Before I wrap two quick highlights on how we are helping our partners transform and accelerate impact with the best across Google.
Speaker Change: Number one to help Mcdonald's build the restaurant of the future. We are deepening our partnership across cloud and as part of this includes them connecting Google clouds latest hardware and data technologies across restaurants globally and starting to apply gen AI to enhance its customer and employee experiences.
Philipp Schindler: We recently shared that YPP has paid out more than any other creator monetization platform, including over $70 billion to creators, artists, and media companies over the last three years. From a viewer's perspective, watch time across YouTube continues to grow, with strength in both shorts and CTV. According to Nielsen, YouTube has been the leader in US streaming watch time for the last 12 plus months.
Speaker Change: Number two W. P. P at Google Cloud next we announced a new collaboration that will redefine marketing through the integration of our Gemini models with W. P. P. Open Wp's AI powered marketing operating system already used by more than 35000 of its people and adopted by key clients, including the Coca Cola Company L'oreal and nest.
Philipp Schindler: In the first quarter, Living Room benefited from a combination of strong watch time growth, innovation in the user and advertiser experience, and a shift in brand advertising budgets from linear TV to YouTube. Viewers are watching YouTube because they expect to access everything in one place, across screens and formats. Favorite creators, live sports, breaking news, educational content, movies, music, and more, and advertisers continue to lean in to find audiences they can't find elsewhere, which brings me to monetization.
Speaker Change: We're just getting started here and excited about the innovation this partnership will unlock.
Speaker Change: With that a huge thank you to our customers and partners many of whom were excited to see at Google marketing live in brand cast in just a few weeks and a huge thank you as always to our incredible teams for their agility and hard work this quarter Ruth Europe.
Speaker Change: Thank you Philip we are very pleased with our financial results for the first quarter driven in particular by strength in search and cloud as well as the ongoing efforts to Durably reengineer our cost base.
Philipp Schindler: We're pleased with our Q1 performance across both our ad-supported and subscription offerings. Sundar covered subscription growth. On the ads front, direct and brand were both strong this quarter. Shorts monetization continued to improve, with shorts ads now supported on mobile, tablet, living room, and desktop and available to both performance and brand advertisers. In the US, the monetization rate of shorts relative to in-stream viewing has more than doubled in the past 12 months, including a 10-point sequential improvement in the first quarter alone. Just last week, we introduced new ways for brands to get the most out of their shorts ads with new lineups on YouTube Select, including sports, beauty, fashion, and lifestyle, and entertainment.
Philip: The comments will be on year over year comparisons for the first quarter unless I state otherwise I will start with the results at the alphabet level, followed by segment results and conclude with our outlook.
Speaker Change: For the first quarter, our consolidated revenues were $80 5 billion up 15% or up 16% in constant currency.
Speaker Change: Search remains the largest contributor to revenue growth.
Speaker Change: In terms of total expenses the year on year comparisons reflect the impact of the restructuring charges. We took in the first quarter of 2023 of $2 6 billion.
Speaker Change: As well as the $716 million and employee severance and related charges in the first quarter of 2024.
Philipp Schindler: For YouTube advertisers, increasing brand lift is one of the core goals. In Q1, we saw strong traction from the introduction of a Pause Ads pilot on connected TVs, a new, non-interruptive ad format that appears when users pause their organic content. Initial results show that Pause ads are driving strong brand lift results and commanding premium pricing from advertisers. Before I wrap, two quick highlights on how we're helping our partners transform and accelerate impact with the best across Google. 1.
Speaker Change: As you can see in our earnings release. These charges were allocated across the expense lines and other cost of revenues and Opex based on associated head count to.
Speaker Change: To help with year on year comparisons we included a table in our earnings release to adjust other cost of revenues operating expenses operating income and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024.
Speaker Change: In terms of expenses total cost of revenues was $33 7 billion up 10% other.
Philipp Schindler: To help McDonald's build the restaurant of the future, we're deepening our partnership across cloud and ads. Part of this includes them connecting Google Cloud's latest hardware and data technologies across restaurants globally and starting to apply Gen AI to enhance its customer and employee experiences. Number two, WPP.
Speaker Change: Other cost of revenues was $20 8 billion up 10% on a reported basis with the increase driven primarily by content acquisition costs associated with Youtube given the very strong revenue growth in both subscription offerings and AD supported content.
Speaker Change: On an adjusted basis other cost of revenues were up 13% year on year.
Speaker Change: Operating expenses were $21 4 billion down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A offset by an increase in R&D. The largest single factor in the year on year decline in G&A expenses was lower charges related.
Philipp Schindler: At Google Cloud Next, we announced a new collaboration that will redefine marketing through the integration of our Gemini models with WPP Open, WPP's AI-powered marketing operating system already used by more than 35,000 of its people and adopted by key clients, including the Coca-Cola company, L'Oreal, and Nestle. We're just getting started here and excited about the innovation this partnership will unlock. With that, a huge thank you to our customers and partners, many of whom were excited to see it at Google Marketing Live and Brandcast in just a few weeks. And a huge thank you, as always, to our incredible teams for their agility and hard work this quarter. Ruth, you're up.
Speaker Change: To legal matters.
Speaker Change: On an adjusted basis operating expenses were up 5%, reflecting first in R&D and increase in compensation expense, primarily for Google deep mined in cloud and second and sales and marketing at slight increase year on year, reflecting increases in compensation expense primarily for cloud.
Speaker Change: Sales.
Speaker Change: Operating income was $25 5 billion up 46% on a reported basis and our operating margin was 32% on an adjusted basis operating income was up 31% and our operating margin was 33%.
Ruth M. Porat: Thank you, Philipp. We are very pleased with our financial results for the first quarter, driven in particular by strengthened search and cloud, as well as the ongoing efforts to durably re-engineer our cost base. My comments will be on year-over-year comparisons for the first quarter unless I state otherwise. I will start with results at the alphabet level, followed by segment results, and conclude with our outlook. For the first quarter, our consolidated revenues were $80.5 billion, up 15% or up 16% in constant currency. Search remained the largest contributor to revenue growth.
Speaker Change: Net income was $23 7 billion and EPS was $1 89, we delivered free cash flow of $16 8 billion in the first quarter and $69 1 billion for the trailing 12 months, we ended the quarter with 108 billion in cash and marketable securities.
Speaker Change: Turning to segment results within Google services revenues were $70 4 billion up 14%.
Speaker Change: Google search and other advertising revenues of $46 2 billion in the quarter were up 14% led again by growth in retail.
Speaker Change: Youtube advertising revenues of $8 1 billion or up 21% driven by both direct response and brand advertising network.
Ruth M. Porat: In terms of total expenses, the year-on-year comparisons reflect the impact of the restructuring charges we took in the first quarter of 2023 of $2.6 billion, as well as the $716 million in employee severance and related charges in the first quarter of 2024. As you can see in our earnings release, these charges were allocated across the expense lines and other costs of revenues and OpEx based on associated headcounts. To help with year-on-year comparisons, we included a table in our earnings release to adjust other cost of revenues, operating expenses, operating income, and operating margin to exclude the impact of severance and related office space charges in the first quarter of 2023 versus 2024.
Speaker Change: Advertising revenues of $7 4 billion or down 1%.
Speaker Change: Subscriptions platforms and devices revenues were $8 7 billion up 18%, primarily reflecting growth in Youtube subscription revenues Tac was $12 9 billion up 10% Google services operating income was $27 9 billion up 28%.
Speaker Change: And the operating margin was 40%.
Speaker Change: Turning to the Google Cloud segment revenues were $9 6 billion for the quarter up 28%, reflecting significant growth in DCP with an increasing contribution from AI and strong digital workspace growth, primarily driven by increases in average revenue per seat.
Ruth M. Porat: In terms of expenses, total cost of revenues was $33.7 billion, up 10%. Other cost of revenues was $20.8 billion, up 10% on a reported basis, with the increase driven primarily by content acquisition costs associated with YouTube, given the very strong revenue growth in both subscription offerings and ad-supported content. On an adjusted basis, other costs of revenues were up 13% year-on-year. Operating expenses were $21.4 billion, down 2% on a reported basis, primarily reflecting expense decreases in sales and marketing and G&A, offset by an increase in R&D. The largest single factor in the year-on-year decline in G&A expenses was lower charges related to legal matters.
Speaker Change: Google Cloud delivered operating income of $900 million and an operating margin of 9%.
Speaker Change: As to our other bets for the first quarter revenues were $495 million benefiting from a milestone payment in one of the other bets the operating loss was $1 billion.
Speaker Change: Turning to our outlook for the business with respect to Google services first within advertising. We are very pleased with the momentum of our ads businesses search had broad based strength across verticals and Youtube. We had acceleration in revenue growth driven by brand and direct response looking ahead two points to call out.
Speaker Change: <unk>.
Speaker Change: First results in our advertising business in Q1 continued to reflect strength in spend from APAC based retailers a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter.
Ruth M. Porat: On an adjusted basis, operating expenses were up 5%, reflecting first, in R&D, an increase in compensation expense primarily for Google DeepMind and cloud. And second, in sales and marketing, a slight increase year on year, reflecting increases in compensation expense primarily for cloud sales. Operating income was $25.5 billion, up 46% on a reported basis, and our operating margin was 32%. On an adjusted basis, operating income was up 31%, and our operating margin was 33%.
Speaker Change: Second the Youtube acceleration in revenue growth in Q1 reflects in part lapping the negative year on year growth, we experienced in the first quarter of 2023.
Speaker Change: Turning to subscriptions platforms and devices, we continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line the sequential quarterly decline in year on year revenue growth for the line in Q1 versus Q4 reflects in part the fact that we had only one.
Speaker Change: One week of Sunday ticket subscription revenue in Q1 versus 14 weeks in Q4.
Speaker Change: Looking forward, we will anniversary last year's price increase and Youtube TV starting in May with regard to platforms. We are pleased with the performance in play driven by an increase in buyers.
Ruth M. Porat: Net income was $23.7 billion, and EPS was $1.89. We delivered free cash flow of $16.8 billion in the first quarter and $69.1 billion for the trailing 12 months. We ended the quarter with $108 billion in cash and marketable securities.
Speaker Change: With respect to Google Cloud performance in Q1 reflects strong demand for our TCP infrastructure and solutions as well as the contribution from our workspace productivity tools. The growth we're seeing across cloud is underpinned by the benefit AI provides for our customers. We continue to invest aggressively while remaining focused on <unk>.
Ruth M. Porat: Turning to segment results, within Google services, revenues were $70.4 billion, up 14%. Google Search and other advertising revenues of $46.2 billion in the quarter were up 14%, led again by growth in retail. YouTube advertising revenues of $8.1 billion were up 21%, driven by both direct response and brand advertising. Network Advertising revenues of $7.4 billion or down 1% Subscriptions, platforms, and devices revenues were $8.7 billion, up 18%, primarily reflecting growth in YouTube subscription revenues.
Speaker Change: <unk> growth.
Speaker Change: As we look ahead to points that will affect sequential year on year revenue growth comparisons across alphabet first Q1 results reflect the benefit of leap year, which contributed slightly more than one point to our revenue growth rate at the consolidated level in the first quarter second at current spot rates, we expect that.
Larger headwind from foreign exchange in Q2 versus Q1.
Speaker Change: Turning to margins our efforts to Durably reengineer, our cost base are reflected in a 400 basis point expansion of our alphabet operating margin year on year, excluding the impact of restructuring and severance charges in both periods.
Ruth M. Porat: You can also see the impact in the quarter on quarter decline in head count in Q1, which reflects both the actions we've taken over the past few months and a much slower pace of hiring as.
Ruth M. Porat: CAC was $12.9 billion, up 10% Google Services Operating Income was $27.9 billion, up 28%, and the operating margin was 40% Turning to the Google Cloud segment, revenues were $9.6 billion for the quarter, up 28%, reflecting significant growth in GCP with an increasing contribution from AI and strong Google Workspace growth primarily driven by increases in average revenue per seat. Google Cloud delivered operating income of $900 million and an operating margin of 9%. As to our other bets for the first quarter, revenues were $495 million, benefiting from a milestone payment in one of the other bets. The operating loss was $1 billion.
Speaker Change: As we have discussed previously we are continuing to invest in top engineering and technical talent, particularly in cloud, Google Deep mine and technical infrastructure.
Speaker Change: Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full year 2020 for alphabet operating March.
Speaker Change: <unk> expansion relative to 2023.
Speaker Change: With respect to Capex, our reported Capex in the first quarter was $12 billion. Once again, driven overwhelmingly by investment in our technical infrastructure with the largest component for servers, followed by data centers.
Ruth M. Porat: Turning to our outlook for the business, with respect to Google services, first within advertising, we are very pleased with the momentum of our ads businesses, and search has broad-based strength across verticals. In YouTube, we had acceleration in revenue growth driven by brand and direct response. Looking ahead, there are two points to call out. First, results in our advertising business in Q1 continued to reflect strength and spend from APAC-based retailers, a trend that began in the second quarter of 2023 and continued through Q1, which means we will begin lapping that impact in the second quarter.
Speaker Change: The significant year on year growth in Capex in recent quarters reflects our confidence in the opportunities offered by AI across our business.
Ruth M. Porat: Looking ahead, we expect quarterly capex throughout the year to be roughly at or above the Q1 level keeping in mind that the timing of cash payments can cause variability in quarterly reported capex with.
Ruth M. Porat: With regard to other bets, we similarly have work streams underway to enhance overall returns.
Speaker Change: Finally, as I Trust you saw in the press release, we are very pleased to be adding a quarterly dividend of <unk> 20 per share to our capital return program.
Speaker Change: As well as a new 70 billion authorization and share repurchases.
Ruth M. Porat: Second, the YouTube acceleration in revenue growth in Q1 reflects, in part, lapping the negative year-on-year growth we experienced in the first quarter of 2023. Turning to Subscriptions, Platforms, and Devices. We continue to deliver significant growth in our subscriptions business, which drives the majority of revenue growth in this line. The sequential quarterly decline in year-on-year revenue growth for the line in Q1 versus Q4 reflects, in part, the fact that we had only one week of Sunday ticket subscription revenue in Q1 versus 14 weeks in Q4.
Ruth M. Porat: The core of our capital allocation framework remains the same beginning with investing aggressively in our business as you have heard us talk about today given the extraordinary opportunities ahead, we view the introduction of the dividend as further strengthening our overall capital return program. Thank you Sundar, Philip and I will.
Speaker Change: Now take your questions.
Speaker Change: Yes.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line. Once your question that's been stated.
Speaker Change: And our first question comes from Brian Nowak with Morgan Stanley. Please go ahead.
Speaker Change: Great. Thanks for taking my question I have two.
Brian Thomas Nowak: Two the first one I wanted to ask about overall search behavior.
Ruth M. Porat: Looking forward, we will anniversary last year's price increase in YouTube TV starting in May. With regard to platforms, we are pleased with the performance in play driven by an increase in buyers. With respect to Google Cloud, performance in Q1 reflects strong demand for our GCP infrastructure and solutions, as well as the contribution from our Workspace Productivity tools. The growth we are seeing across Google Cloud is underpinned by the benefit AI provides for our customers.
Brian Thomas Nowak: I know you talked in the past about our overall query trends continue to grow.
Brian Thomas Nowak: To drill a little bit more into monetize a bowl and commercial query trends are there.
Brian Thomas Nowak: And any changes in sort of your commercial query trends growth has just been all these new entrants moving around E Commerce and my first one in.
Brian Thomas Nowak: And then the second one when you talked about sort of a more effort to moderate expense growth from here can you just sort of give us. Some examples of areas, where you still see the potential for more optimization or work streams in place to continue to really reengineer. The opex base as we go throughout 2020.
Ruth M. Porat: We continue to invest aggressively while remaining focused on profitable growth. As we look ahead, there are two points that will affect sequential year-on-year revenue growth comparisons across Alphabet. First, Q1 results reflect the benefit of leap year, which contributed slightly more than one point to our revenue growth rate at the consolidated level in the first quarter. Second, at current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1. Turning to margins, our efforts to durably re-engineer our cost base are reflected in a 400 basis point expansion of our alphabet operating margin year-on-year, excluding the impact of restructuring and severance charges in both periods. You can also see the impact in the quarter-on-quarter decline in headcount in Q1, which reflects both actions we have taken over the past few months and a much slower pace of hiring.
Brian Thomas Nowak: Yeah.
Speaker Change: Thanks, Brian for your first question.
Speaker Change: Look I think broadly you know.
Speaker Change: <unk> always found that over many years when you know when things will work well on the organic side.
Speaker Change: Monetization follows so typically there.
Speaker Change: Once we see carryover well overall.
Speaker Change: I think with with generative AI and search with our AI or views.
Speaker Change: We are definitely you know I think we will expand that type of queries. We can serve our users. We can add some more complex question as well as and in general that all seems to carryover across credit categories. Obviously, it's still early and we are going to be measured and put user experience. It.
Speaker Change: Front, but you know we are positive about what this transition means.
Speaker Change: And on the second question in terms of the various work streams as well.
Speaker Change: Sundar and I said, we remain very focused on an.
Speaker Change: Ongoing efforts to slow the pace of expense growth that we've been calling durably reengineering, our cost base and I've made this point in opening comments that we are very cognizant of the increasing headwind we have from higher depreciation and expenses associated with the higher Capex and so these efforts are ongoing and they're very they're very much the same that we've talked with you.
Ruth M. Porat: As we have discussed previously, we are continuing to invest in top engineering and technical talent, particularly in the cloud, Google DeepMind, and technical infrastructure. Looking ahead, we remain focused on our efforts to moderate the pace of expense growth in order to create capacity for the increases in depreciation and expenses associated with the higher levels of investment in our technical infrastructure. We believe these efforts will enable us to deliver full-year 2024 Alphabet Operating Margin Expansion relative to 2023. With respect to CapEx, our reported CapEx in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure, with the largest component being servers, followed by data centers.
Speaker Change: About previously you know it starts with product and process prioritization all of the work around organizational efficiency and structure. These are ongoing and so as an example.
Ruth M. Porat: The work that Sundar talked about combining devices and services with our platforms and ecosystems product areas are really good example, because unifying the teams not only helps us deliver higher quality products and experiences, but we think it enables us to move with greater velocity and efficiency and then the other work streams they've talked to you about in the past like all of the work.
Ruth M. Porat: The significant year-on-year growth in CapEx in recent quarters reflects our confidence in the opportunities offered by AI across our business. Looking ahead, we expect quarterly CapEx throughout the year to be roughly at or above the Q1 level, keeping in mind that the timing of cash payments can cause variability in quarterly reported CapEx. With regard to other bets, we similarly have work streams underway to enhance overall returns. Finally, as I believe you saw in the press release, we are very pleased to be adding a quarterly dividend of $0.20 per share to our capital return program, as well as a new $70 billion authorization for share repurchases.
Ruth M. Porat: Around technical infrastructure, which sundar alluded to.
Ruth M. Porat: Streamlining operations within the company through the use of AI, what we're doing with procurement with our suppliers and vendors, which he also reference the work you've seen on real estate optimization. These are all ongoing work streams, which is why we have them under the umbrella durably reengineering, our cost base and they are ongoing.
Speaker Change: Our next question comes from Doug Anmuth with Jpmorgan. Your line is now open.
Douglas Till Anmuth: Thanks for taking the question.
Douglas Till Anmuth: Sundar, you talked about bringing more generative AI features into the main search page can you just talk about what kind of queries or scenarios do you think that that's working best score so far and just how we should think about the cadence of continue.
Douglas Till Anmuth: Continuing to adopt more of those features within core search.
Ruth M. Porat: Then Ruth on.
Ruth M. Porat: On Capex spending $12 billion.
Speaker Change: <unk> can we assume that run rating that and above is reasonable for this year and I know, it's very early but should.
Ruth M. Porat: The core of our capital allocation framework remains the same, beginning with investing aggressively in our business, as you have heard us talk about today, given the extraordinary opportunities ahead. We view the introduction of the dividend as further strengthening our overall capital return program. Thank you. Sundar, Philipp, and I will now take your questions. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.
Ruth M. Porat: We generally expect higher Capex next year as well.
Ruth M. Porat: Yeah.
Ruth: Thanks, Doug on on X gene search.
Ruth M. Porat: Okay. Thank it tends to really.
Ruth M. Porat: We're seeing early confirmation of our thesis that you know this will expand.
Ruth M. Porat: Expand the universe of queries fair, we are able to really provide people with the mix of factual answers are linked to sources across the web and bring a variety of perspectives all in an innovative way and.
Operator: To prevent any background noise, we ask that you please mute your line once your question has been stated. And our first question comes from Brian Nowak with Morgan Stanley. Please go ahead.
Ruth M. Porat: We've been rolling out AI all of us in the U S and the U K.
Brian Thomas Nowak: Great. Thanks for taking my question. I have two.
Philipp Schindler: You know trying to mainly tackle queries, which are more complex, where we think the SCE will clearly improve the experience.
Philipp Schindler: The first one is about overall search behavior. Philipp, I know you talked in the past about how overall query trends continue to grow. Can I ask you to drill a little bit more into monetizable and commercial query trends? Have there been any changes in your commercial query trends growth? My first question is, "There's just been all these new entrants moving around in e-commerce." And the second one, Baruch, when you talked about sort of more efforts to moderate expense growth from here, can you just sort of give us some examples of areas where you still see the potential for more optimization or work streams in place to continue to generally re-engineer the OpEx space as we go throughout 2024? Thanks. Thanks, Brian.
Ruth M. Porat: We've already said billions of queries and you know in and it seems to cut across our categories, but we are still continuing our testing.
Philipp Schindler: Testing in and we'll keep you know we are metrics driven in the serious end, so we will but I, but I am optimistic that it clearly improves the user experience users are telling us that and we are seeing it in our metrics and we will continue evolving through the course of this year.
Ruth M. Porat: And then in terms of Capex, you know as I said in opening comments, we do expect the quarterly capex throughout the year to be roughly at or above the 12 billion cash Capex we had.
Ruth M. Porat: To your first question, look, I think broadly, you know, we've always found that over many years when things work well on the organic side, monetization follows. So typically, the trends we see carry over well. Overall, I think with generative AI in search and our AI overviews, we are definitely going to expand the type of queries we can serve our users; we can answer more complex questions as well, and in general, that all seems to carry over across query categories.
Philipp Schindler: Here in Q1 as I said, you can always have variability.
Ruth M. Porat: And the reported quarterly Capex, just due to the timing of cash payments, but roughly at or above this level and it really goes to centers common opening comment that we're very committed to making the investments required to keep us at the leading edge and technical infrastructure to support the growth in cloud all the innovation in search that he and Philip has spoken about.
Ruth M. Porat: And our lead with Gemini I will note that that most nearly all I should say of the Capex was in our technical infrastructure.
Ruth M. Porat: Obviously, it's still early, and we are going to be measured and put user experience first, but, you know, we are positive about what this transition means. And on the second question, in terms of the various work streams, you know, as both Sundar and I said, we remain very focused on ongoing efforts to slow the pace of expense growth, what we've been calling durably reengineering our cost base. And, you know, I made this point in my opening comments, but we are very cognizant of the increasing headwind we have from higher depreciation and expenses associated with higher CapEx.
Ruth M. Porat: We expect that our investment in office facilities will be about less than 10% of the total capex in 'twenty 'twenty four roughly flat with our Capex in 2023, but is still there.
Ruth M. Porat: And then with respect to 2025 as he said, it's premature to comment and I think to add on that.
Speaker Change: Great. Thank you.
Ruth M. Porat: Our next question comes from Eric Sheridan with Goldman Sachs. Please go ahead.
Speaker Change: Thanks, So much maybe just one question.
Eric Sheridan: Picture in nature, So sundar.
Ruth M. Porat: Your earlier comments at the beginning of the call and framing up longer term initiatives and longer term narrative.
Eric Sheridan: You could talk a little bit about both the opportunity and the challenge is.
Ruth M. Porat: And so these efforts are ongoing, and they're very much the same that we've talked with you about previously. You know, it starts with product and process prioritization, all of the work around organizational efficiency and structure.
Speaker Change: Operating at scale and at a time.
Ruth M. Porat: Like this where there's a lot of technology innovation going on and how you see the elements of trying to think about.
Ruth M. Porat: Moving the organization forward, while still continuing to both invest for growth as well as balance margin. Thanks, so much.
Speaker Change: Thanks, Eric Great question.
Speaker Change: Lee I think the transition I think it's a once in a generation kind of an opportunity.
Ruth M. Porat: And so, as an example, the work that Sundar talked about, combining devices and services with our platforms and ecosystems, product area is a really good example, because unifying the teams not only helps us deliver higher quality products and experiences, but we think it enables us to move with greater velocity and efficiency. And then there are the other work streams we've talked to you about in the past, like all of the work around technical infrastructure, which Sundar alluded to, streamlining operations within the company through the use of AI, what we're doing with procurement with our suppliers and vendors, which he also referenced, and the work you've seen on real estate optimization.
Speaker Change: We definitely are.
Ruth M. Porat: <unk> been gearing up for this for a long time, you can imagine we started building Gpus in 2016, so we've definitely been gearing up for a long time, the real opportunities. We see is the scale of.
Speaker Change: You know research and innovation, which we have built up and were going to continue to deliver.
Sundar Pichai: I think for the first time, we can work on AI in a horizontal way and impact the entire breadth of the company beat search be it Youtube cloud be beat Raimo and so on.
Ruth M. Porat: And we see rapid pace of innovation in that underlying so it's a very leveraged way to do it and I see that as a real opportunity ahead.
Ruth M. Porat: These are all ongoing work streams, which is why we have them under the umbrella of durably reengineering our cost base, and they are ongoing. Our next question comes from Doug Anmuth with JPMorgan. Your line is now open.
Speaker Change: In terms of the challenges I think you know making sure.
Speaker Change: I think we are.
Speaker Change: We are constantly I think it's been a mindset shift, which we've been driving across the company to make sure that we are embracing this opportunity, but but being very efficient in how we're approaching it.
Douglas Till Anmuth: Thanks for taking the question. Sundar, you talked about bringing more generative AI features to the main search page. Can you just talk about what kind of queries or scenarios you think that it's working best for so far, and just how we should think about the cadence of continuing to adopt more of those features within core search? And then Ruth, on CapEx, spending $12 billion on one queue, can we assume that a run rating of that and above is reasonable? For this year, and I know it's very early, but should we generally expect higher CapEx next year as well? Thanks, Doug.
Douglas Till Anmuth: Making sure we are redirecting our people to the highest priorities across the company.
Speaker Change: Building on our 20 years of experience in driving machine efficiencies year on year.
Ruth: So that we can put our dollars to work as efficiently as possible. So making sure. We're balancing all of that moving forward in a very bold and responsible way at the same time those are the important things to get right for my from my perspective.
Sundar Pichai: On SGE in Search, I think it tends to really, we're seeing early confirmation of a thesis that, you know, this will expand the universe of queries where we are able to really provide people with a mix of factual answers, a link to sources across the web, and bring a variety of perspectives, all in an innovative way. We've been rolling out AI overviews in the U.S. and U.K., trying to We've already served billions of queries, and it seems to cut across categories, but we are still continuing our testing, and we are metrics-driven in these areas, but I am optimistic that it clearly improves the user experience. Users are telling us that, and we are seeing it in our metrics, and we'll continue evolving it through the course of this year.
Speaker Change: Our next question comes from Stephen Ju with UBS. Your line is now.
Stephen D. Ju: Alright. Thank you so much so hi, Philip.
Stephen D. Ju: It's approaching the two year anniversary for the launch of ads on Youtube shorts, and I think you've given us an update on our monetization pick up sequentially, but you know with that in mind I think.
Stephen D. Ju: Youtube is.
Sundar Pichai: Launch of an array of AD products and automation tools to help advertisers cost for what they are doing to the vertical screen. So how is this translating into by and among your advertiser clients and secondly, based on what you've seen over the last two years are there any structural reasons that you can cite as to why the monetization.
Sundar Pichai: <unk>.
Stephen D. Ju: Cannot match what is already the case on the horizontal screen.
Speaker Change: Yes look.
Sundar Pichai: It's a great question first of all I mean, let's start with the fact that you took performances was very strong and this quarter and on shorts, specifically in the U S. I mentioned, how the monetization rate of Schwartz relative to industry and viewing has more than doubled in last 12 months I think that's what you were referring to.
Sundar Pichai: And then in terms of CapEx, you know, as I said in my opening comments, we do expect the quarterly CapEx throughout the year to be roughly at or above the $12 billion cash CapEx we had here in Q1. As I said, you can always have variability in the reported quarterly CapEx just due to the timing of cash payments, but roughly at or above this level.
Sundar Pichai: And yes, we're obviously very happy with this development the way to think about it as advertisers really only spend with us when they see a positive ROI.
Sundar Pichai: So you can assume that this wouldnt be happening unless it were to work for advertisers in the short term and also in the long term that's an important part I think.
Sundar Pichai: Overall shorts is a long term bet for the business has really.
Ruth M. Porat: And it really goes to Sundar's comment, his opening comment, that we're very committed to making the investments required to keep us at the leading edge in technical infrastructure to support the growth in cloud, all the innovation and search that he and Philip have spoken about, and our lead with Gemini. I will note that most, you know, nearly all, I should say, of the CapEx was in our technical infrastructure. We expect that our investment in office facilities will be about less than 10% of the total CapEx in 2024, roughly flat with our CapEx in 2023, but it's still there. And then with respect to 2025, as he said, it's premature to comment, so nothing to add on that. Great
Ruth M. Porat: It helped us respond to both greater in view of demand for short form video.
Ruth M. Porat: We talked about the strong growth, averaging 70 billion daily views I mentioned, a number of channels are uploading has increased 50% year over year. So again very happy with us development and to your question structural reasons, whether we can't get to a match here.
Ruth M. Porat: I have a hard time seeing those at the moment overtime.
Speaker Change: Okay. Thank you.
Ruth M. Porat: Our next question comes from Justin Post with Bank of America. Your line is now.
Speaker Change: Great. Thank you I'm going to ask another one about capex it seems to be your biggest investment area.
Ruth M. Porat: Just first you saw the big uptick the last two quarters.
Ruth M. Porat: Investing in AI for years is the uptick because supply is getting easier to get or do you see more opportunities with the available supply to really fuel AI. So it has the gpus and everything gotten better that you feel more investing more and then thinking about the returns both for.
Eric Sheridan: Thank you. Our next question comes from Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan: Thanks so much. Maybe just one question about the big picture in nature. So Sundar, if we come back to your earlier comments at the beginning of the call and framing up longer-term initiatives and longer-term narratives, I wanted to know if you could talk a little bit about both the opportunities and the challenges of operating at scale in a time like this, where there's a lot of technological innovation going on, and how you see the elements of trying to strike a balance towards moving the organization forward while still, Thanks so much.
Eric Sheridan: For advertising and cloud on the Capex do you feel like this is a higher cost of doing business or do you think this is an opportunity to even get better returns on your capital spend than you've had in the past. Thank you.
Speaker Change: So the increase in Capex as Sundar said and I said really reflects the opportunity we continue to see across the company. It starts with all that we're doing in support of the foundation mob that hold the Gemini foundational model, but then also clearly.
Eric Sheridan: The work our cross cloud on behalf of cloud customers and the growth that we're seeing with G. C. P and the infrastructure work there and then of course, there's both Sundar and Philip talked about the application across search Youtube.
Sundar Pichai: Thanks, Eric. Great question. You know, obviously, I think the AI transition is a once in a generation kind of opportunity. We've definitely, you know, been gearing up for this for a long time. As you can imagine, we started building TPUs in 2016.
Sundar Pichai: And more broadly are the services that they were able to offer so I'd say the growing application and are focused on ensuring that we have the capacity to deliver and support of the surfaces and opportunities we see across across alphabet and it really goes to the second part of your question.
Sundar Pichai: So we've definitely been gearing up for a long time. The real opportunities we see is the scale of, [inaudible] so it's a very leveraged way to do it and I see that as a real opportunity ahead. In terms of the challenges, I think, you know, making sure, I think we are constantly, I think it's been a mindset shift which we've been driving across the company to make sure that we are embracing this opportunity but being very efficient in how we are approaching it, making sure we are redirecting our people to the highest priorities across the company, building on our 20 years of experience in driving machine efficiencies year on year so that we can put our dollars to work as efficiently as possible.
Speaker Change: Which is that as we're investing in capex and applying it across our various businesses that opens up more services and products, which bring revenue opportunities and we're very focused on the monetization.
Sundar Pichai: Opportunity it does underlie everything that we're doing in digital services, and Google cloud and as Sundar noted.
Sundar Pichai: We're at the same time very focused on the efficiency.
Sundar Pichai: All elements of delivering that compute capacity from hardware software and beyond.
Sundar Pichai: Okay.
Sundar Pichai: Our next question comes from Mark Mahaney with Evercore.
Speaker Change: Your line is now open.
Sundar Pichai: So making sure that we balance all of that, moving forward in a very bold and responsible way at the same time, those are the important things to get right from my perspective. Our next question comes from Stephen Ju with UBS. Your line is now open. All right, thank you so much.
Stephen D. Ju: Great. Thank you this is Jeremy for Mark Mahaney.
Stephen D. Ju: Couple of questions. One just maybe an expansion on the search for your questions on this one.
Stephen D. Ju: More like volume maybe in the context of the Google environment like AI Chatbot. For example, we've seen kind of meta AI directing to Google search results.
Stephen D. Ju: I think it's approaching the two-year anniversary of the launch of ads on YouTube Shorts, and I think you've given us an update on monetization pickups sequentially, but with that in mind, I think YouTube has... Launched an array of ad products and automation tools to help advertisers transfer what they're doing to the vertical screen. So how is this translating into buy-in among your advertiser clients? And secondly, based on what you've seen over the last two years, are there any structural reasons that you can cite as to why monetization cannot match what is already the case on the horizontal screen?
Stephen D. Ju: You think there's actually a scenario where like AI assistant can create a step function change in search volume of use cases of Google.
Stephen D. Ju: Give us more color on what are you seeing right now or what you're expecting to see in that area and then the second question I'll just comment on Youtube and cloud.
Stephen D. Ju: Sitting at a 100 billion run rate.
Stephen D. Ju: Warming out real good visibility for you. If you can talk about is it driven by any sort of cloud demand inflection or step change in the journey I workflow demands.
Speaker Change: Flesh it out a little bit thanks, a lot.
Stephen D. Ju: And your first question look you know.
Stephen D. Ju: Thanks. Yeah, look, this is a great question. First of all, I mean, let's start with the fact that YouTube performance was very strong and this quarter, and for shorts, specifically in the US, I mentioned how the monetization rate of shorts relative to in-stream viewing has more than doubled in the last 12 months. I think that's what you were referring to.
Stephen D. Ju: I said this before but.
Speaker Change: To be clear.
Stephen D. Ju: We view this moment as a positive moment for search and I think it allows us to evolve our product in a profound way.
Stephen D. Ju: And searches a unique experience you know people come in.
Stephen D. Ju: And they get too.
Philipp Schindler: And yes, we're obviously very happy with this development. The way to think about it is that advertisers really only spend with us when they see a positive ROI. So you can assume that this wouldn't be happening unless it worked for advertisers in the short term and also in the long term. That's an important part, I think.
Stephen D. Ju: B to B, one answers if you want to explore more if you want to get perspectives from across the <unk> and to be able to do it crossed the breadth and depth of everything they are looking for.
Philipp Schindler: And the innovation you would need to keep it up I think I think it's what we've been.
Philipp Schindler: Overall, shorts is a long-term bet for the business. It has really helped us respond to both creator and viewer demand for short-form video. We talked about the strong growth, averaging 70 billion daily views. I mentioned the number of channels uploading has increased 50% year-on-year. So again, very happy with this development. And to your question, structural reasons, whether we can get to a match here, I have a hard time seeing those at the moment in time.
Philipp Schindler: You know building on for a long time, and so I feel we are extraordinarily well setup, particularly given the innovation path, we're on and overall I view this moment as a positive moment.
Philipp Schindler: So that's how I would say on the second part of it.
Speaker Change: I'm sorry, what was.
Philipp Schindler: I think that the Youtube and cloud.
Philipp Schindler: Okay.
Speaker Change: Yeah in terms of your comment about 100 billion exit rate for.
Philipp Schindler: Youtube and cloud what's driven this what's driving this visibility for you.
Philipp Schindler: Any kind of inflection you're seeing in the continent.
Philipp Schindler: I would just say from Sundar his opening comments as just the ongoing momentum that we've seen in the business that we've been talking about the ongoing growth of strong performance and so what we were really getting at in that comment what Sundar I was getting at is that we've continued to build strong businesses over time and that just helps dimension. It we had similar comments last quarter. When you talk about our subscription.
Philipp Schindler: Thank you. Our next question comes from Justin Post with Bank of America. Your line is now open.
Justin Post: Great, thank you. I'm going to ask another question about CapEx. It seems to be your biggest investment area. First, you saw a big uptick in the last two quarters, but you've been investing in AI for years. Is the uptick because supply is getting easier to get, or do you see more opportunities with the available supply to really fuel AI? So have the GPUs and everything gotten better so that you feel more comfortable investing in more?
Justin Post: Since we're really proud of all the work the teams are doing across the company building new strong hubs are.
Justin Post: Attunity is delivering for our users for customers for advertisers in profound ways since that was just helping to dimension.
Justin Post: What we have built over the years.
Justin Post: Okay.
Justin Post: Our next question comes from Ken Goralski with Wells Fargo. Your line is now open.
Justin Post: And then thinking about the returns, both for advertising and the cloud on the CapEx, do you feel like this is a higher cost of doing business, or do you think this is an opportunity to even get better returns on your capital spend than you've had in the past? Thank you.
Speaker Change: Thank you very much two if I may 1st on <unk>, you had nice acceleration.
Justin Post: <unk> in the quarter could you talk a little bit about the opportunities.
Justin Post: And constraints upon <unk> ability to continue to address that large addressable market and accelerate growth.
Ruth M. Porat: So the increase in CapEx, as Sundar said and I said, really reflects the opportunity we continue to see across the company. It starts with all that we're doing in support of the foundation model, called the Gemini foundational model, but then also clearly the work across cloud on behalf of cloud customers and the growth that we're seeing with GCP and the infrastructure work there. And then, of course, as both Sundar and Phillip talked about, the application across search, YouTube, and more broadly, the services that we're able to offer.
Justin Post: Is it more sales oriented is it more product sell solutions or both and where they are.
Ruth M. Porat: Will you do you plan to address most of these organically or or could a partner approach work for you and then the second one just more detail on.
Ruth M. Porat: On.
Ruth M. Porat: Youtube and sports rights could.
Speaker Change: Could you talk could you reiterate your view on further live sports rights there is some larger.
Ruth M. Porat: Mostly in the U S League rights coming up soon and we'll be more over the next several years could you just talk about your philosophy there beyond the NFL Sunday ticket. Thank you.
Speaker Change: Thanks look on the cloud side, obviously, you know it's definitely a point of inflection overall I think the AI.
Ruth M. Porat: So it's the growing application and our focus on ensuring that we have the compute capacity to deliver in support of the services and opportunities we see across Alphabet. And it really goes to the second part of your question, which is that as we're investing in CapEx and applying it across our various businesses, it opens up more services and products, which bring revenue opportunities, and we're very focused on the monetization opportunity. It does underlie everything that we're doing in Google services and Google Cloud.
Ruth M. Porat: Transformation is making everyone think about you know that whole stack and we are engaged in a number of conversations.
Ruth M. Porat: Beat AI infrastructure of people really looking to vertex AI, given our depth and breadth of model choice or or using workspace to transform productivity in your workplace et cetera. So I think the opportunities there are all related to that but all the work we have built up an AI being a pause.
Ruth M. Porat: Of inflection in terms of driving conversations.
Ruth M. Porat: And as Sundar noted, we're at the same time very focused on the efficiency of all elements of delivering that compute capacity from hardware, software, and beyond. Our next question comes from Mark Mahaney with Evercore. Your line is now open. Great, thank you. This is Jan Lee on behalf of Mark Mahaney.
Ruth M. Porat: I think youll see us do at both both organically and with a strong partner program as well. So we'll do it with the combination and the challenges here always and you know in in.
Jan Lee: For the there are switching costs to cloud and the challenges we see is how do we make.
Jan Lee: A couple of questions. One, just maybe an expansion on the search query questions from before. More like search volume, maybe in the context of the off-Google environment, like AI chatbots, for example. We've seen a kind of meta AI directing to Google search results. Do you think there's actually a scenario where an AI system can create a step function change in search volume or use cases off-Google?
Jan Lee: Make it easier for people, there's a lot of interest, but you know theres definitely barriers in terms of people switch.
Jan Lee: Switching and so that's an area, where we're constantly investing to make it easier for our customers.
Jan Lee: And with regard to your sports rights question look I mean, we've had long standing and significant partnerships with the most popular sports League here in the U S around the globe federations teams athletes broadcasters and obviously these partnerships in combination with a very vast audience of sports fans drives investment in subscription experiences across many offerings.
Jan Lee: Do you think there's more color on what you're seeing right now or what you are expecting to see in that area? And then the second question on just the comment about YouTube and cloud exiting at a 100 billion run rate: what is informing this outlook of visibility for you? If you can talk about it, is it driven by any sort of cloud demand inflection or step change in the next generation of AI workload demand? If you can flesh it out a little bit. Thanks a lot.
Jan Lee: And I felt Sunday ticket Youtube TV Youtube primetime channels and so on.
Jan Lee: But theres nothing that we have to announce at the moment. We're obviously always looking at where we can create more value for our users for advertisers for creators.
Speaker Change: Nothing specific to talk about at this moment.
Speaker Change: Thank you.
Sundar Pichai: You know, on your first question, look, you know, I said this before, but, to be clear, we view this moment as a positive moment for search. I think it allows us to evolve our product in a profound way. And, and search is a unique experience. You know, people come and go, and they get to, be it if they want answers, if they want to explore more, if they want to get perspectives from across the web, and to be able to do it across the breadth and depth of everything they are looking for.
Jan Lee: Our next question comes from Ross Sandler with Barclays. Your line is now open.
Speaker Change: Great Sundar I had a question about smartphone based AI searches.
Sundar Pichai: You guys are powering all these new AI interaction researches on pixel and on Samsung devices.
Sundar Pichai: I think there is speculation that Jim and I might be used on iOS in the future state. So the question is if users store.
Sundar Pichai: Searching on smartphones and those searches are basically rendered on the model on the phone without accessing the web how do you guys anticipate monetizing some of these smartphone base behaviors that are kind of wrong on the edge any thoughts on that.
Sundar Pichai: And the innovation. You would need to keep that up. I think I think it's what we've been, you know, building on for a long time. And so I feel we are extraordinarily well set up, particularly given the innovation path we are on. And overall, I view this moment as a positive moment. So that's how I would say it on the second part, Ruth.
Ruth: Okay. Thank you.
Sundar Pichai: The.
Sundar Pichai: If you look at what users are looking for.
Speaker Change: You know people are looking for information and ability to connect but thinks outside so.
Sundar Pichai: I think there'll be a set of use cases, which you'll be able to do on device.
Ruth M. Porat: I'm sorry, what was the I think the YouTube and cloud. Yeah, like in terms of your comment about 100 billion exit rates for YouTube and the cloud, what's driving this? What's driving this visibility for you?
Sundar Pichai: But for a lot of what people are looking to do I think you will need the richness of the cloud the web and you have to deliver to users. So I think you know I think so again to my earlier comments.
Ruth M. Porat: And any kind of inflection you're seeing in cloud demand? Oh, I would just say from Sundar's opening comments that it's just the ongoing momentum that we've seen in the business that we've been talking about ongoing growth and strong performance. And so what we were really getting at in that comment, what Sundar was getting at, is that we've continued to build strong businesses over time. And that just helps dimension it. We had similar comments last quarter.
Ruth M. Porat: I think through all of this moment you saw what we have done with Samsung would circle to search I think it gives a new way for people to access search conveniently wherever they are and so I view this as a positive way to bring bring our services to users in a more seamless manner. So you know I think.
Ruth M. Porat: I think its positive from that perspective in terms of on devices is cloud.
Ruth M. Porat: When you talk about our subscription business, we're really proud of all the work that teams are doing across the company, building new, strong opportunities, delivering for our users, for customers, for advertisers in profound ways. And so it was just helping to dimension what we have built over the years. Our next question comes from Ken Gawrelski with Wells Fargo. Your line is now open. Thank you very much. Two, if I may.
Kenneth James Gawrelski: There will be needs, which can be done on device and we should to help us from a privacy standpoint, but there are many many things for which people will need to reach out to the cloud and so I don't see that as being a big driver in the on cloud with soft cloud in any way.
Kenneth James Gawrelski: And our last question comes from Colin Sebastian with Baird. Your line is now open.
Kenneth James Gawrelski: Thanks, and good afternoon I.
Kenneth James Gawrelski: I guess first a follow up on some of the questions on ESG into core search I guess I'm wondering along with some of those changes in behavior is there a way to quantify that overall engagement shifts whether that's an increase in time spent or increase in.
Kenneth James Gawrelski: First on GCP, you had a nice acceleration in the quarter. Could you talk a little bit about the opportunities and constraints upon GCP's ability to continue to address that large addressable market and accelerate growth? Is it more sales-oriented? Is it more products or solutions, or both?
Kenneth James Gawrelski: And over the level of increase in inquiries.
Sundar Pichai: And do you plan to address most of these organically or could a partner approach work for you? And then the second one, just more detail on YouTube and sports rights. Could you talk, could you reiterate your view on further live sports rights? There are some larger, mostly in the U.S. league, rights coming up soon and will be more over the next several years.
Kenneth James Gawrelski: For both sort of traditional search as well as more generative.
Sundar Pichai: More generative answers and then secondly on the hardware roadmap.
Sundar Pichai: I assume later this year, we'll hear more about about some of the products, but any areas of particular focus or that you would point out that we should keep in mind in terms of hardware launches in the back half. Thank you.
Philipp Schindler: Could you just talk about your philosophy there beyond the NFL Sunday ticket? Thank you. Thank you. Look, on the cloud side, obviously, you know, it's definitely a point of inflection overall.
Sundar Pichai: First question on <unk> on search.
Philipp Schindler: Not much more to add to what I said, but what we've seen and remember we've been in light of experiments just for a few weeks and in U S and the U K and on our slice of Aquarius, where and all indications are positive that it improves user satisfaction.
Sundar Pichai: I think the AI transformation is making everyone think about, you know, their whole stack, and we are engaged in a number of conversations. I think the AI infrastructure, people are really looking to vertex AI, given our depth and breadth of model choice, or using workspace to transform productivity in your workplace, etc. So I think the opportunities there are all related to that, both all the work we've built up and AI being a point of inflection in terms of driving conversations. I think you will see us do it both ways, you know, both organically and with a strong partner program as well. So we'll do it with a combination.
Sundar Pichai: We see an increase in engagement, but I see this as something which will play out over time, but if you were to step back you.
Sundar Pichai: At this moment.
Sundar Pichai: There were a lot of questions last year, and you know, we always felt confident and comfortable that we would be able to improve the user experience people question, but these things would be costly to serve and we are very very confident we can manage the cost of how to serve these queries people worried about latency I think we are.
Sundar Pichai: And the challenges here always and you know, in, for you know there are switching costs to cloud and you know the challenges we see is uh how do we you know make it easier for people there's a lot of interest but you know there's definitely barriers in terms of people uh switching and so that's an area where we are constantly investing to make it uh easier for our customers, And with regard to your sports rights question, look, I mean, we've had longstanding and significant partnerships with the most popular sports league here in the US around the globe, federations, teams, athletes, broadcasters. And obviously, these partnerships in combination with our very vast audience of sports fans drives investment and subscription experiences across many offerings, NFL Sunday Ticket, YouTube TV, YouTube primetime channels, and so on.
Sundar Pichai: When I look at the progress we've made in latency and efficiency, we feel comfortable there.
Sundar Pichai: There are questions about monetization.
Sundar Pichai: And based on our testing so far I'm comfortable and confident that we'll be able to manage the monetization transition here with us well it'll play out over time, but I feel we are well positioned and more importantly, when I look at the innovation.
Sundar Pichai: That's ahead and the way the teams are working hard on it I'm very excited about the future ahead.
Sundar Pichai: Thank you and that concludes our question and answer session for today I'd like to turn the conference back over to Jim Friedland for any further remarks.
Speaker Change: Thanks, everyone for joining us today, we look forward to speaking with you again on our second quarter 2024 call. Thank you and have a good evening.
Sundar Pichai: But there's nothing that we have to announce at the moment. We're obviously always looking at where we can create more value for users, for advertisers, for creators, but there's nothing specific to talk about at this moment. Thank you. Our next question comes from Ross Sandler with Barclays. Your line is now open.
Ross Adam Sandler: Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Sundar Pichai: [music].
Ross Adam Sandler: Great. Sundar, I had a question about smartphone-based AI searches. So you guys are powering all these new AI interactions and searches on Pixel and on Samsung devices. And I think there's speculation that Gemini might be used on iOS in a future state. So the question is, if users start Searching on smartphones, and those searches are basically rendered on the screen of the phone without accessing the web, how do you guys anticipate monetizing some of these smartphone-based behaviors that are kind of run on the edge? Any thoughts on that?
Ross Adam Sandler: Yes.
Ross Adam Sandler: Sure.
Ross Adam Sandler: [music].
Sundar Pichai: Look, I think, you know, the Can you look at what users are looking for? People are looking for information and an ability to connect with things outside. So I think there will be a set of use cases which you'll be able to do on the device. But for a lot of what people are looking to do, I think you will need the richness of the cloud, and the web, and you have to deliver it to users.
Sundar Pichai: So I think, you know, I think, again, to my earlier comments. I think through all these moments, you saw what we did with Samsung with Circle to Search. I think it gives a new way for people to access search conveniently wherever they are, and so I view this as a positive way to bring our services to users in a more seamless manner. So, you know, I think it's positive from that perspective.
Sundar Pichai: In terms of on devices as clouds, there will be needs which can be done on the device, and we should help them from a privacy standpoint. But there are many, many things for which people will need to reach out to the cloud. And so I don't see that as being a big driver in the on cloud with soft cloud in any way.
Colin Alan Sebastian: And our last question comes from Colin Sebastian with Baird. Your line is now open. Thanks and good afternoon. I guess first, follow up on some of the questions on on SGE and the core search. I guess I'm wondering, you know, along with some of those changes in behavior, is there a way to quantify that overall engagement shift, whether that's an increase in time spent or increase in, you know, in over the level of increase in queries for both sort of traditional search as well as more generative, More generative answers.
Colin Alan Sebastian: Okay.
Colin Alan Sebastian: [music].
Colin Alan Sebastian: Yes.
Colin Alan Sebastian: Yeah.
Colin Alan Sebastian: Yeah.
Colin Alan Sebastian: [music].
Colin Alan Sebastian: And then secondly, on the hardware roadmap, I assume, you know, later this year, we'll hear more about some of the products, but any areas of particular focus or that you would point out that we should keep in mind in terms of hardware launches in the back half? Thank you. The first question on search, you know, not much more to add to what I said, you know, but what we've seen. And remember, we have been running live experiments for just a few weeks in the US and UK on a slice of our queries, and all indications are positive that it improves user satisfaction.
Colin Alan Sebastian: Yes.
Colin Alan Sebastian: Yes.
Colin Alan Sebastian: Okay.
Colin Alan Sebastian: Yeah.
Colin Alan Sebastian: [music].
Colin Alan Sebastian: Yes.
Colin Alan Sebastian: [music].
Colin Alan Sebastian: Yes.
Colin Alan Sebastian: Yes.
Sundar Pichai: We see an increase in engagement, but you know, I see this as something which will play out over time. But if you were to step back, you know, this moment, there were a lot of questions last year, and we always felt confident and comfortable that we would be able to improve the user experience. People question whether these things would be costly to serve.
Colin Alan Sebastian: [music].
Sundar Pichai: And we are very, very confident we can manage the cost of how to sell these queries because people are worried about latency. I think we are, when I look at the progress we've made in latency and efficiency, we feel comfortable. But there are questions about monetization. And, you know, based on our testing so far, I'm comfortable and confident that we'll be able to manage the monetization transition here well as well. It'll play out over time, but I feel we are well positioned.
Sundar Pichai: Okay.
Sundar Pichai: Sure.
Sundar Pichai: [music].
James H. Friedland: And more importantly, when I look at the innovation that's ahead and the way the teams are working hard on it, I am very excited about the future. Thank you, and that concludes our question and answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks. Thank you, everyone, for joining us today. We look forward to speaking with you again on our second quarter 2024 call. Thank you, and have a good evening. Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect. , Microsoft Office Word MSWordDoc Word Document.8,,,,,,,,,,
James H. Friedland: Okay.
James H. Friedland: Yeah.
James H. Friedland: Pete.