Q1 2024 Alphabet Inc Earnings Call

Welcome everyone. Thank you for standing by for the alphabet first quarter 2024 earnings Conference call.

Operator: Welcome, everyone. Thank you for standing by for the Alphabet First Quarter 2024 Earnings Conference Call.

Operator: At this time, all participants are in a listen-only mode. 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 1 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.

At this time all participants are in a listen only mode. After the speaker 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.

James 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 now I'll quickly cover the safe Harbor.

James 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.

James Friedland: Now, I'll quickly cover the safe harbor. 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. However, actual results could differ materially.

James 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 statements.

James Friedland: Please refer to our forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. 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 abc.xyz forward slash investor. Our comments will be on year-over-year comparisons unless we state otherwise. And now, I'll turn the call over to Sundar.

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 xyz 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: Thank you, Jim, 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 the 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: 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.

Sundar: Let's discuss our momentum and strategy.

Sundar: 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.

Sundar: And just the last six years, we've gone from $100 billion to more than 300 billion in annual revenue.

Sundar: Of course search continues to power that as you've seen our Q1 results.

Sundar: But in addition, we expect Youtube overall and cloud to exit 2024 at a combined annual run rate of over $100 billion.

Sundar: This shows our track record of investing in and building successful new growing businesses.

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.

Sundar: Now, let's look at how well we are positioned for the next wave of AI innovation and the opportunity ahead.

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.

Sundar: 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 GemIIni 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.

Sundar: First our foundation of research leadership.

Sundar: Been 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.

Sundar: This will help simplify development and establish a single access point for our product teams.

Sundar: Hey, Bill generated by AI applications with these models.

Sundar: The teams are making rapid progress developing Gemini and other models.

Sundar: In February we rolled out Gemini 1.5, pro which shows dramatic performance enhancements across a number of dimensions.

Sundar: It includes a breakthrough in long context for understanding our key.

Sundar: 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 Gemma Ini, we have built other useful models, including our Gemma Open models, as well as Imagine visual models and others. Second, Infrastructure Leadership.

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.

Sundar: Beyond Gemini via built other useful models, including our Jim open models as well as imagine visual models and others.

Sundar: Second infrastructure leadership, we have the best infrastructure for the AI era.

Sundar Pichai: 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 cells. Our data centers are some of the most high-performance, secure, reliable, and efficient in the world.

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.

Sundar: 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've 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.

Sundar: Our custom Tpu's 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 expenditures. 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. Each shift expanded what people could do with search and led to new growth.

Sundar: We're 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.

Sundar: This will fuel growth in cloud help us push the frontiers of AI models.

Sundar: Enable innovation across our services, especially in search.

Sundar: 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. Each shift expanded what people can do with search and led to new growth. We are seeing a similar shift happening now with generative AI for nearly a year, we have been experimenting with SG and searched labs across a wide range of queries.

Sundar Pichai: 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 results page. 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 merchandising. We have already served billions of queries with our generative AI features.

Sundar: And now we are starting to bring AI all of us to the main searches so speech.

Sundar: 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: 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 more.

Sundar Pichai: 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 Circle to Search, 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: Most notably based on our testing we are encouraged that we are seeing an increase in search 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.

Sundar: Ask a question about an image.

Sundar: Our object and a video and get an AI overview with lands.

Sundar: Fourth our global product footprint beyond search.

Sundar Pichai: Fourth, our global product footprint beyond CERT. We have 6 products with more than 2 billion monthly users, including 3 billion Android devices. Fifteen products have 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. Fifth, Improved Velocity and Execution.

Sundar: We have six products with more than 2 billion monthly users, including 3 billion Android devices.

Sundar: <unk> products have half a billion users.

Sundar: 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.

Sundar: 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: First improved velocity and execution.

Sundar Pichai: 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, bringing together our platforms and devices team. 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 will also remain focused on long-term efforts to durably re-engineer our cost base.

Sundar: We've been really focused on simplifying our structures to help us more 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 smarter compute allocation and a better customer experience.

Sundar: 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: The new combined team will focus on delivering high quality products and experiences.

Sundar: Bolstering the Android and chrome ecosystems.

Sundar: And bringing our best innovations to partners faster.

Sundar: We also remain focused on long term efforts to Durably reengineer our cost base.

Sundar Pichai: 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. 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 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 support.

Sundar: You can see the impact of this work reflected in our operating margin improvement.

Sundar: We continue to manage our head count growth and aligned teams with our highest priority areas.

Sundar: This speeds up decision, making radios as layers and enables us to invest in the right areas.

Sundar: 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.

Sundar: 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 the 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 and the cloud, as well as subscriptions. Philipp will talk more about new AI features that are helping advertisers, including bringing Gemini models into Performance Max. 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 Advance. Okay, those are the six points.

Sundar: 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.

Sundar: 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.

Sundar: 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 on 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, CentOS, 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.

Sundar: In cloud, we have announced more than 1000, new products and features over the past eight months.

Sundar: At Google Cloud next more than 300 customers and partners spoke about the regenerative AI sex assist with Google cloud.

Sundar: <unk> global brands like bear sent Us Mercedes Benz Walmart and many more.

Sundar: Our differentiation in cloud begins with our AI hype a computer.

Sundar: 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.

Sundar: Today more than 60% of funded Gen AI startups, and nearly 90% of <unk> unit costs, our Google cloud customers.

Sundar: And customers like Paypal and cacao brain are choosing our infrastructure.

Sundar: We offer an industry, leading portfolio of Nvidia Gpus, along with RTP use.

Sundar: 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 CloudNet. And we share that more than 1 million developers are now using our generative AI across tools, including AI Studio and Vertex AI.

Sundar: 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.

Sundar: 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 to point out at cloud next.

Sundar: And we shared that more than 1 million developers are now using our generative AI across tools, including AI studio and vertex AI.

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, our AI-powered agent that's built right into Gmail, Docs, Sheets, and more.

Sundar: 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 towards nearly 10000 call center agents to achieve faster resolution times for customers.

Sundar: Customers can also now ground, there Jen AI with Google search and their own data from their enterprise databases and applications.

Sundar: In workspace, we announced that organizations like Uber Pepperdine University, and Penny Mac are using Gemini and Google workspace, our AI powered agent Thats built right into Gmail docs sheets anymore.

Sundar Pichai: We also announced Google Bits, a new application to create stories in a short video format, and we introduced Gemini for meetings and messaging and Gemini security for workspace. 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 cybersecurity. I saw this firsthand when I went to the Munich Security Conference in February.

Sundar: We also announced Google bits, a new application to create stories and short video format.

Sundar: And we introduced <unk> for meetings and messaging and Gemini security for workspace.

Sundar: Customers are choosing workspace, because they have deep trusting our powerful security and privacy features.

Sundar: Our cloud business is now widely seen as the leader in cyber security.

Sundar: Saw this firsthand when I went to the Munich Security Conference in February.

Sundar Pichai: Cybersecurity 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, we announce that on average, viewers are watching over 1 billion hours of YouTube content on TVs daily. AI experiments like DreamScreen will give anyone the ability to make AI-generated backgrounds for YouTube videos.

Sundar: 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.

Sundar: Turning next to Youtube, which continues to grow and lead in streaming.

Sundar: We announced that on average viewers are watching over $1 billion of Youtube content on TV daily.

Sundar: AI experiments like Dream screen will give anyone the ability to make AI generated backgrounds for Youtube shots.

Sundar Pichai: And on subscriptions, which are increasingly important for YouTube, we announced that in Q1, YouTube surpassed 100 million music and premium subscribers globally, including triplets, 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.

Sundar: And on subscriptions, which are increasingly important for Youtube.

Sundar: We announced that in Q1, Youtube surpassed 100 million music and premium subscribers globally, including trailers.

Sundar: And Youtube TV now has more than 8 million paid subscribers.

Sundar: Finally in other bets.

Sundar: <unk> 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.

Sundar: Overall, it was a great quarter and theres more to come.

Sundar Pichai: IOs 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.

Sundar: <unk> is in less than three weeks, followed by brand cast and Google marketing live.

Sundar: 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 healthful services and new opportunities for businesses and partners around the world. Thank you Philip.

Philipp Schindler: Thanks Sundar, and hi everyone. Google 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 brand. Network revenues declined 1% year-on

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.

Philip: Network revenues declined 1% year on year.

Philipp Schindler: In subscriptions, platforms, and devices, year-on-year revenues increased 18%, driven again by strong growth in YouTube subscriptions. Now, let's 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 This is foundational.

Philip: 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.

Philip: 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.

Sundar: And how products like broad match leverage <unk> to match ads to relevant searches and help advertisers respond to what millions of people are searching for this is foundational.

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.

Sundar: As advances accelerate in our underlying AI models, our ability to help businesses find use us at speed and scale and drive ROI, just keeps getting better where.

Sundar: We're especially excited about the doors <unk> opening for creative capabilities, helping deliver on the premise of getting the right AD to the right user and the right moment.

Sundar: Look at performance Max and February raw Gemini into Pemex is helping cure rate and generate text and image assets a business can meet pemex asset requirements instantly.

Philipp Schindler: In February, we rolled Gemini into PMax. It's helping curate and generate text and image assets so businesses can meet PMax 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 ad set 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.

Sundar: This is available to all U S advertisers and starting to roll out internationally in English and early results are encouraging.

Sundar: Advertisers using Pemex asset generation are 63% more likely to publish a campaign with good or excellent that strength.

Sundar: And those will improve their pemex at strength to excellent 6% more conversions on average.

Philipp Schindler: We're also driving improved results for businesses opting into automatically created assets, which are supercharged with GenAI. Those adopting ACAC see on average 5% more conversions at a similar cost per conversion in search and performance max campaigns. And then there's DemandGen.

Sundar: We're also driving improved results for businesses opting into automatically created assets, which are supercharged with gen AI.

Sundar: Those adopting AC AC on average 5% more conversions at a similar cost per conversion in search and performance Max campaigns.

Sundar: 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: 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, Demand Gen 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 Demand Gen for two new titles.

Sundar: Hollywood film and television studio Lionsgate partnered with Horizon to test what campaign type will deliver the most ticketing page views for its the hunger games Deloitte of songbirds and snakes phone.

Sundar: 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: We're also bringing new creative features to Demand Gen. 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 navigated from desktop to mobile.

Sundar: We're also bringing new creative features to demand Gen earlier. This month, we announced new generative image tools to help advertisers create high quality assets and a few steps with a few simple prompts this will be wind for up leveling visual storytelling and testing creative concepts more efficiently.

Sundar: And then there's obviously search and her experience where sundar talked about.

Speaker Change: I'll add 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 S. G and we shared in March how folks are finding as either above or below the <unk> results.

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: Helpful. We're excited to have a solid baseline to keep innovating on and confident in the role SG, including US 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 and Q1 retail was again the top contributor our focus remains on driving profitability and growth for retail us helping them optimize the digital performance for both online and offline as well as innovate across our shopping at merchant experiences.

Philipp Schindler: In Q1, retail was again the 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: 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.

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: By measuring two three times more revenue than using value based bidding solutions to bid to its omnichannel customers Ikea 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.

Speaker Change: Retailers can convert turned into action by showcasing in store availability pricing pick up 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.

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 more than 3 million channels in our YouTube Partner Program. 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.

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 the number of channels uploading shorts year on year grew 50%.

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 last three years.

Philipp Schindler: 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 U.S. streaming watch time for the last 12-plus months. 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: From our view us perspective.

Speaker Change: Each 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.

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: The favorite creators life sports breaking news educational content movies music and more.

Speaker Change: And advertisers continue to lean into final audience is they can't find elsewhere.

Speaker Change: Which brings me to monetization.

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 U.S., 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.

Speaker Change: We're pleased with our Q1 performance across both our AD supported and subscription offerings soon.

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.

Speaker Change: For 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.

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 are commanding premium pricing from advertisers.

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're 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 cloud latest hardware and data technologies across restaurants globally and starting to apply gen AI to enhance its customer and employee experiences.

Philipp Schindler: Before I wrap, two quick highlights on how we're helping our partners transform and accelerate impact with the best across Google. Number one, 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 GenAI to enhance their customer and employee experiences. Number two, WPP.

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 less.

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 we're excited to see 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: 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.

Ruth Porat: My comments will be on year over year comparisons for the first quarter unless I state otherwise.

Ruth 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.

Ruth Porat: I will start with the results at the alphabet level, followed by segment results and conclude with our outlook.

Ruth Porat: For the first quarter, our consolidated revenues were $80 5 billion up 15% or up 16% in constant currency.

Ruth Porat: Search remains the largest contributor to revenue growth.

Ruth 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.

Ruth Porat: 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. 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 in other cluster revenues and OpEx based on associated headcounts.

Ruth Porat: As well as the $716 million and employee severance and related charges in the first quarter of 2024.

Ruth Porat: 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.

Ruth Porat: 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.

Ruth Porat: 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.

Ruth Porat: In terms of expenses total cost of revenues was $33 7 billion up 10% other.

Philipp Schindler: 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.

Ruth 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.

Ruth Porat: On an adjusted basis other cost of revenues were up 13% year on year.

Ruth Porat: 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.

Ruth Porat: Legal matters.

Ruth Porat: 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.

Ruth 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%.

Ruth Porat: Sales.

Ruth Porat: 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% net income was $23 7 billion and <unk>.

Ruth Porat: <unk> 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.

Ruth Porat: Turning to segment results within Google services revenues were $70 4 billion up 14%.

Ruth 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.

Ruth Porat: Google search and other advertising revenues of $46 2 billion in the quarter were up 14% led again by growth in retail.

Ruth Porat: Youtube advertising revenues of $8 1 billion or up 21% driven by both direct response and brand advertising.

Ruth Porat: Network advertising revenues of $7 4 billion or down 1%.

Ruth 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 were down 1%.

Ruth Porat: 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%.

Ruth Porat: And the operating margin was 40%.

Ruth Porat: Turning to the Google Cloud segment revenues were $9 6 billion for the quarter up 28%, reflecting significant growth in D. C. P with an increasing contribution from AI and strong digital workspace growth, primarily driven by increases in average revenue per seat.

Ruth Porat: 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%, 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.

Ruth Porat: Google Cloud delivered operating income of $900 million and an operating margin of 9%.

Ruth Porat: 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.

Ruth 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 search had broad based strength across verticals and Youtube, we had acceleration in revenue growth driven by brand and direct response.

Ruth Porat: 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.

Ruth Porat: Looking ahead two points to call out.

Ruth Porat: 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 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. Search had 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.

Ruth 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.

Ruth Porat: 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. 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.

Ruth Porat: Turning to subscriptions platforms and devices, we continue to deliver significant growth in our subscription 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.

Ruth Porat: Weak of Sunday ticket subscription revenue in Q1 versus 14 weeks in Q4.

Ruth Porat: Looking forward, we will anniversary last year's price increase and Youtube TV starting in May.

Ruth Porat: With regard to platforms. We are pleased with the performance in play driven by an increase in buyers.

Ruth Porat: 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. Looking forward, we will anniversary last year's price increase on YouTube TV starting in May.

Ruth Porat: With respect to Google Cloud performance in Q1 reflects strong demand for our <unk> 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 Porat: 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.

Ruth Porat: Profitability growth 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.

Ruth Porat: At current spot rates, we expect a larger headwind from foreign exchange in Q2 versus Q1.

Ruth 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.

Ruth Porat: 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 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 Porat: As we have discussed previously we are continuing to invest in top engineering and technical talent, particularly in cloud, Google deep mined and technical infrastructure.

Ruth Porat: 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 margin.

Ruth 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.

Ruth Porat: Expansion relative to 2023.

Ruth Porat: 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 the.

Ruth Porat: The significant year on year growth in Capex in recent quarters reflects our confidence in the opportunities offered by AI across our business.

Ruth 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 Porat: 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. 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.

Ruth Porat: With regard to other bets, we similarly have work streams underway to enhance overall returns.

Ruth Porat: 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.

Ruth Porat: As well as a new 70 billion authorization and share repurchases.

Ruth 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.

Ruth Porat: 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. 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.

Ruth Porat: Thank you Sundar, Philip and I will now take your questions.

Ruth Porat: 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.

Ruth Porat: And our first question comes from Brian Nowak with Morgan Stanley. Please go ahead great.

Brian Nowak: Thanks for taking my question.

Brian Nowak: The first one I wanted to ask about overall search behavior, Philip I know you've talked in the past about our overall query trend continuing to grow.

Brian Nowak: A little bit more and to monetize the bowl and commercial query trends has there been any changes in sort of your commercial query trends growth has been all these new entrants moving around E Commerce and my first one.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. 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. Great, thanks for taking my...

Brian Nowak: And the second one for Ruth and when you talked about sort of 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 early reengineer. The Opex base as we go throughout 2024.

Brian Nowak: Thanks, Brian the first question.

Brian Nowak: Great. Thanks for taking my question. I have two.

Brian Nowak: I think broadly what you have.

Brian Nowak: 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 as you've seen all these new entrants moving around in e-commerce? That's my first question. And the second one for Ruth, when you talk 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.

Brian Nowak: <unk> always found that over many years when you know when things will work well on the organic side.

Ruth Porat: Monetization follows so typically.

Ruth Porat: The trends, we see carryover well overall.

Ruth Porat: I think with.

Ruth Porat: It generated AI and search with our AI or views.

Ruth Porat: We are definitely.

Brian Nowak: I think we will expand that type of queries. We can serve our users. We can add some more complex questions was in general that all seems to carry or across credit categories. Obviously, it's still early and we are going to be measured and put user experience at front, but you know we are positive.

Philipp Schindler: Thanks, Brian. 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, with our AI overviews. We are definitely going to, you know, I think we will expand the type of queries we can serve our users.

Ruth Porat: About what this transition means.

Ruth Porat: And on the second question in terms of the various work streams.

Ruth Porat: It's both Sundar and I said, we remain very focused on an.

Ruth Porat: Ongoing efforts to slow the pace of expense growth, what we've been calling durably reengineering, our cost base and I made this point in the 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.

Philipp Schindler: We can answer more complex questions as well, and, in general, that all seems to carry over across query categories. 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...

Philipp Schindler: 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. These are ongoing and so as an example.

Ruth Porat: 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 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 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, and all of the work around organizational efficiency and structure. These are ongoing, 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.

Ruth Porat: Around technical infrastructure, which sundar alluded to.

Ruth 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.

Ruth Porat: Our next question comes from Doug Anmuth with J P. Morgan Your line is now open.

Douglas Anmuth: Thanks for taking the question.

Douglas 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 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.

Ruth Porat: 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. 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.

Douglas Anmuth: Spending $12 billion in.

Douglas Anmuth: <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 Porat: We generally expect higher Capex next year as well.

Douglas Anmuth: Yeah.

Ruth Porat: Thanks, Doug on on X gene search.

Speaker Change: Okay. Thank it tends to really we are seeing early confirmation of our thesis that you know this will.

Ruth Porat: Expand the universe of queries, where 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: Our next question comes from Doug Anmuth with JPMorgan. Your line is now open.

Douglas 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?

Douglas Anmuth: We've been rolling out AI all of us in the U S and the U K.

Speaker Change: You know trying to mainly tackled queries, which are more complex, where we think the SCE will clearly improve the experience.

Douglas Anmuth: We've always had billions of queries and you know in and it seems to cut across our categories.

Douglas Anmuth: Categories, but we are still continuing our testing.

Speaker Change: 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.

Sundar Pichai: Thanks, Doug. On SGE in Search, look, 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 link to sources across the web and bring a variety of perspectives all in an innovative way and, We've been rolling out AI overviews in the U.S. and U.K. You know, trying to mainly tackle queries which are more complex where we think the SGE will clearly improve the experience.

Douglas Anmuth: 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.

Douglas Anmuth: Here in Q1 as I said, you can always have variability.

Sundar Pichai: We've already served billions of queries, and, you know, and it seems to cut across categories, but we are still continuing our testing, and we'll keep, you know, we are metrics-driven in these areas, and so we'll, 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. And then in terms of CapEx, you know, as I said,

Sundar Pichai: 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 senders common 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 in search that he and Philip has spoken about.

Douglas Anmuth: 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 Porat: 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. And it really goes to Sundar's opening comment, that we're very committed to making the investments required to keep us at the leading edge of technical infrastructure to support the growth of cloud, all the innovation and search that he and Philipp have spoken about, and our lead with Gemini.

Douglas Anmuth: 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 is still there.

Douglas Anmuth: And then with respect to 2025 as he said, it's premature to comment so nothing to add on that.

Speaker Change: Great. Thank you.

Ruth Porat: Our next question comes from Eric Sheridan with Goldman Sachs. Please go ahead.

Speaker Change: Thanks, So much maybe just one question.

Ruth Porat: Picture in nature, So sundar.

Ruth Porat: 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 is still there. And then with respect to 2025, as he said, it's premature to comment, so nothing to add on that.

Ruth Porat: Let me come back to your earlier comments at the beginning of the call and framing up longer term initiatives and longer term narrative.

Ruth Porat: You could talk a little bit about both the opportunities and the challenges.

Ruth Porat: Operating at scale and at a time.

Ruth 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 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, you know, obviously I think the transition I think it's a once in a generation kind of an opportunity.

Operator: Our next question comes from Eric Sheridan with Goldman Sachs. Please go ahead.

Eric Sheridan: Thanks so much. Maybe just one question of a big picture in nature for Sundar. 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 continuing to both invest Thanks, Eric. Great.

Eric Sheridan: We definitely are.

Eric Sheridan: <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.

Eric Sheridan: You know research and innovation, which we have built up and will.

Eric Sheridan: Going to continue to deliver.

Speaker Change: I think for the first time, we can work on.

Eric Sheridan: In a horizontal way and impact the entire breadth of the company beat search bead Youtube it cloud be beat Venmo and so on.

Sundar Pichai: Thanks, Eric. Great question.

Sundar Pichai: 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. You can imagine we started building TPUs in 2016, so we've definitely been gearing up for a long time.

Sundar Pichai: 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.

Sundar Pichai: In terms of the challenges I think you know making sure.

Sundar Pichai: I think we are.

Sundar Pichai: 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.

Sundar Pichai: The real opportunities we see are the scale of... My name is Sundar Pichai, and I'm the CEO of DeepMind, and I'm here to talk to you about AI. DeepMind is a company that's been around for a long time. It's a company that's been around for a long time. It's a company that's been around for a long time.

Sundar Pichai: Making sure we are redirecting our people to the highest priorities across the company.

Sundar Pichai: Building on our 20 years of experience in driving machine efficiencies year on year.

Sundar Pichai: In terms of the challenges, I think, you know, making sure that 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 that we are redirecting our people to the highest priorities across the company, building on our 20 years of experience driving machine efficiencies year on year so that we can put our dollars to work as So making sure we balance all of that and move forward in a very bold and responsible way at the same time. Those are the important things to get right, from my perspective.

Sundar Pichai: 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 important things to get right for my from my perspective.

Sundar Pichai: Our next question comes from Stephen Ju with UBS. Your line is now open.

Speaker Change: Alright. Thank you so much so hi, Philip.

Sundar Pichai: It's approaching the two year anniversary for the launch of ads on Youtube shorts.

Stephen Ju: You've given us an update on our monetization pick up sequentially, but you know what.

Sundar Pichai: That in mind, I think each of us thought.

Operator: Our next question comes from Stephen Ju with UBS. Your line is now open.

Stephen Ju: She's been array of AD products and automation tools to help advertisers cost for what theyre doing to the vertical screen.

Stephen Ju: All right, thank you so much. So, hi Philipp.

Philipp Schindler: 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 pickup sequentially, but, you know, with that in mind, I think, you know, 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? Thanks. Yeah, look at it.

Stephen Ju: 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.

Philipp Schindler: Cannot match what is already the case on the horizontal screen.

Speaker Change: Yes look this is a <unk>.

Philipp Schindler: 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 extreme viewing has more than doubled in the last 12 months I think that's what you were referring to.

Philipp Schindler: And yes, we're obviously very happy.

Philipp Schindler: With this development the way to think about it as advertisers really only spend with us when they see a positive ROI.

Philipp Schindler: 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.

Philipp Schindler: 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.

Philipp Schindler: Overall shorts is a long term bet for the business has really.

Philipp Schindler: It helped us respond to both greater in view of demand for short form video.

Philipp Schindler: We talked about the strong growth, averaging 70 billion daily views I mentioned the 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 get to a match here.

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.

Philipp Schindler: I have a hard time seeing those at the moment overtime.

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 over 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.

Speaker Change: Okay. Thank you.

Philipp Schindler: 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.

Philipp Schindler: Just first you saw the big uptick the last two quarters.

Philipp Schindler: 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 that you feel more investing more and then thinking about the returns both for.

Operator: 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: 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.

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.

Ruth 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 Philipp talked about, the application across search, YouTube, and more broadly, the services that we're able to offer.

Justin Post: The work our cross cloud on behalf of cloud customers and the growth that we're seeing with TCP and the infrastructure work there and then of course, there's both Sundar and Philip talked about the application across search Youtube.

Ruth Porat: 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.

Ruth 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. 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.

Ruth Porat: 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.

Ruth Porat: Opportunity it does underlie everything that we're doing in digital services, and Google cloud and as Sundar noted.

Ruth Porat: We're at the same time very focused on the efficiency.

Ruth Porat: All elements of delivering that compute capacity from hardware software and beyond.

Ruth Porat: Okay.

Ruth Porat: Our next question comes from Mark Mahaney with Evercore.

Speaker Change: Your line is now open.

Ruth Porat: Great. Thank you. This is Jeremy for Mark Mahaney them a couple of questions. One just maybe an expansion on the search great questions on this one.

Operator: Our next question comes from Mark Mahaney with Evercore. Your line is now open.

Jan Lee: Great. Thank you. This is Jan Lee on behalf of Mark Mahaney.

Mark Stephen Mahaney: More like volume maybe in the context of Google environments like AI chat Bot. For example, we've seen kind of meta yeah directing to Google search results.

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: You think there's actually a scenario where like AI system can create a step function change in search volume use cases of Google.

Jan Lee: 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 of Youtube and cloud.

Sundar Pichai: 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 gen-AI workload demand? If you can flesh it out a little bit. Thanks.

Sundar Pichai: Sitting at a 100 billion run rate.

Sundar Pichai: Wanting this outlook and 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.

Sundar Pichai: Flesh it out a little bit thanks, a lot.

Sundar Pichai: And your first question.

Ruth Porat: 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 search is a unique experience. You know, people come and they get to it, 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, and the innovation you would need to keep that up.

Sundar Pichai: Right.

Ruth Porat: I said this before but.

Ruth Porat: To be clear.

Ruth Porat: We view this moment as a positive moment for search and I think it allows us to evolve our product in a profound way.

Ruth Porat: And and searches a unique experience you know people come in.

Ruth Porat: And they get too.

Ruth Porat: B to B one answers if you wanted 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.

Ruth Porat: And the innovation you would need to keep it up I think I think it's what we've been.

Ruth Porat: I think, I think it's what we've been 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. I'm sorry, what was the... I think the YouTube and cloud.

Ruth Porat: 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.

Ruth Porat: So that's how I would say on the second part of it.

Speaker Change: I'm sorry, what was.

Ruth Porat: I think that the Youtube and cloud.

Sundar Pichai: Yeah, like in terms of your comment about the 100 billion exit rate for YouTube and the cloud, what's driving this visibility for you and any kind of inflection you're seeing in the cloud? Oh, I would just say, from Sundar's opening comments...

Ruth Porat: Okay.

Speaker Change: Yeah in terms of your comment about 100 billion exit rate for.

Sundar Pichai: Youtube and cloud what's driven this what's driving this visibility for you and any kind of inflection you're seeing in the continent.

Ruth Porat: Oh, I would just say from Sundar's opening comments, it's just the ongoing momentum that we've seen in the business that we've been talking about, the ongoing growth, the 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 when you talked about our subscription business.

Sundar Pichai: I would just say from Sundar his opening comments, it's just the ongoing momentum that we've seen in the business that we've been talking about the ongoing growth and 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 that we had similar comments last quarter. When you talk about are subscription based.

Ruth Porat: 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.

Ruth Porat: We're really proud of all the work the teams are doing across the company building new strong hubs are opportunities delivering for our users for customers for advertisers in profound ways since that was just helping to dimension.

Ruth Porat: What we have built over the years.

Ruth Porat: Okay.

Ruth Porat: Our next question comes from Ken Goralski with Wells Fargo. Your line is now open.

Operator: Our next question comes from Ken Gawrelski with Wells Fargo. Your line is now open.

Kenneth Gawrelski: Thank you very much. Two questions, if I may. 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? And do you plan to address most of these organically or could a partner approach work for you?

Kenneth Gawrelski: Thank you very much two if I may 1st on <unk>, you had nice acceleration in the quarter could you talk a little bit about the opportunities and constraints upon <unk> ability to continue to address that large addressable market and accelerate growth.

Kenneth Gawrelski: Is it more sales oriented is it more products sell solutions or both and where they are.

Kenneth Gawrelski: 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.

Sundar Pichai: 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 U.S. league rights coming up soon and will be more over the next several years. Could you just talk about your philosophy there beyond the NFL Sunday ticket? Thank you.

Kenneth Gawrelski: More detail on.

Sundar Pichai: On.

Sundar Pichai: Youtube and sports rights.

Sundar Pichai: Could you talk could you reiterate your view on further live sports rights there are some larger.

Sundar Pichai: 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.

Philipp Schindler: Thanks. Look, on the cloud side, obviously, you know, it's definitely a point of inflection overall. I think the AI transformation is making everyone think about, you know, their whole stack, and we are engaged in a number of conversations. For example, be it AI infrastructure, people really looking to vertex AI, given our depth and breadth of model choice, or using Workspace to transform productivity in your workplace, et cetera. 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.

Speaker Change: Thanks, Luke on the cloud side.

Philipp Schindler: Lee.

Philipp Schindler: It's definitely a point of inflection overall I think the AI.

Philipp Schindler: Transformation is making everyone think about you know that whole stack and we are engaged in a number of conversations I think beat AI infrastructure people really looking to vertex AI give.

Philipp Schindler: 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 both all of the work we have built up an AI being a point of inflection in terms of driving conversations I think youll see us do it.

Philipp Schindler: I think you'll see us do it both organically and with a strong partner program as well. For, you know, there are switching costs to the cloud, and, you know, the challenges we see are how do we, you know, make it easier for people. There's a lot of interest, but there are definitely barriers in terms of people switching. And so that's an area where we are constantly investing to make it easier for our customers. And with regard to

Philipp Schindler: You know 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.

Philipp Schindler: In <unk>.

Philipp Schindler: For the there are switching costs to cloud and the challenges we see is how do we.

Philipp Schindler: Make it easier for people, there's a lot of interest, but you know theres definitely barriers in terms of people.

Philipp Schindler: And with regard to your sports rights question, look, I mean, we've had longstanding and significant partnerships with the most popular sports leagues here in the US and around the globe, federations, teams, athletes, broadcasters. And obviously, these partnerships, in combination with our very vast audience of sports fans, drive investment and subscription experiences across many offerings, such as NFL Sunday Ticket, YouTube TV, YouTube primetime channels, and so on. 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 our users, for advertisers, and for creators, but there's nothing specific to talk about at this moment.

Philipp Schindler: Switching and so that's an area, where we are constantly investing to make it easier for our customers.

Philipp Schindler: 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.

Philipp Schindler: And I felt Sunday ticket Youtube TV Youtube primetime channels and so on.

Philipp Schindler: 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 our advertisers for creators.

Philipp Schindler: But nothing specific to talk about at this moment.

Speaker Change: Thank you.

Philipp Schindler: Our next question comes from Ross Sandler with Barclays. Your line is now open.

Operator: Our next question comes from Ross Sandler with Barclays. Your line is now open.

Ross 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 the future. So the question is, if users start searching on smartphones, and those searches are basically rendered on the screen on the phone without accessing the web. How do you guys anticipate monetizing some of these smartphone-based behaviors that are kind of running on the edge? Any thoughts on that? Look, I think, um...

Ross Sandler: Great Sundar I had a question about smartphone based AI searches.

Ross Sandler: You guys are powering all these new AI interaction researches on pixel and on Samsung devices.

Ross Sandler: I think there was speculation that Jim and I might be used on iOS in the future state. So the question is if users start.

Ross Sandler: 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.

Speaker Change: Okay. Thank you.

Sundar Pichai: Look, I think, um, you know, the... You know, if 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'll 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. So I think, you know, I think, so again, to my earlier comments.

Ross Sandler: The.

Sundar Pichai: If you look at what users are looking for.

Sundar Pichai: You know people are looking for information and an ability to connect with with thinks outside so.

Sundar Pichai: I think there'll be a set of use cases, which you'll be able to do on device.

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.

Sundar Pichai: I think through all these moments, you saw what we did with Samsung with Circle2Search. I think it gives a new way for people to access search conveniently wherever they are. And so I view this as, you know, 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. In terms of on devices as the cloud, I'm, you know, there will be needs which can be done on the device, and we should help them from a privacy standpoint.

Sundar Pichai: I think through all this moments you saw what we have done with Samsung with Socal to search I think it gives a new way for people to access search conveniently wherever they are and so I view that says you know positive way to bring bring our services to users in a more seamless manner. So you know I think.

Sundar Pichai: I think its positive from that perspective in terms of on devices is cloud.

Sundar Pichai: There will be needs, which can be done on device and we should to help but 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 self cloud in anyway.

Sundar Pichai: 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 versus off cloud debate in any way.

Operator: And our last question comes from Colin Sebastian with Baird. Your line is now open.

Sundar Pichai: And our last question comes from Colin Sebastian with Baird. Your line is now open.

Colin Sebastian: Thanks, and good afternoon. First, a follow-up on some of the questions on SGE and the core search. I guess I'm wondering, 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 an increase in, you know, the level of increase in queries for both sort of traditional search as well as more generative answers.

Speaker Change: Thanks, and good afternoon I.

Colin Sebastian: 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.

Colin Sebastian: And over the level of increase in inquiries.

Colin Sebastian: For both sort of traditional search as well as more generative.

Colin 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.

Colin Sebastian: More generative answers and then secondly on the hardware roadmap.

Colin Sebastian: 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.

Sundar Pichai: 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've been running live experiments just for a few weeks in the US and UK, and on a slice of our queries where, and all indications are positive that it improves user satisfaction. We see an increase in engagement, but, you know, I see this as something that 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.

Sundar Pichai: First question on <unk> on search.

Sundar Pichai: Not much more to add to what I said, but what we've seen and remember we have 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 the user satisfaction.

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: You know 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: It'll play out over time, but I feel we are well positioned, 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 ahead.

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 as well it will play out over time, but I feel we are well positioned and more importantly, when I look at the innovation.

James Friedland: 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.

Sundar Pichai: Head and the way the teams are working hard on it I'm very excited about the future ahead.

James Friedland: 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.

James Friedland: 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.

James Friedland: 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.

Operator: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.

Operator: Thank you.

Operator: This concludes today's conference call. Thank you for participating you may now disconnect.

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