Q1 2025 Alphabet Inc Earnings Call

[music].

With us today are Sundar Pichai Philipp Schindler Ashkenazi.

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.

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.

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.

Okay.

[music].

Our comments will be on year over year comparisons unless we state otherwise.

Sundar: And now I'll turn the call over to Sundar.

Sundar: Thanks, Jim Good afternoon, everyone. We are pleased with our strong results this quarter.

Sundar: We continued to see healthy growth and momentum across the business, including AI powering new features.

Sundar: In search we saw continued double digit revenue growth AI all of US is going very well with over 1.5 billion users per month and we are excited by the early positive reaction to AI mode. There's a lot more to come ahead.

Sundar: And subscriptions, we surpassed 270 million options with Youtube and Google One S key drivers.

Sundar: And cloud grew rapidly with significant demand for our solutions and you saw our leadership in AI cloud next across infrastructure agents anymore.

Sundar: Our differentiated full stack approach to AI continues to be central to our growth.

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Our latest image and video generation models imagine three and we owe to our rolling out broadly and are powering incredible creativity.

Turning to open models, we launched geometry last month delivering state of the art performance for its size.

<unk> models have been downloaded more than 140 million tons.

Lastly, we are developing AI models in new areas, where there's enormous opportunity.

For example, our new Gemini robotics models.

And in health, we launched AI core scientist a multi agent AI research system, while alpha fold is now being used by over 2.5 million researches.

Third turning to products and platforms, all 15 of our products with the half a billion users now use Gemini models.

Android and pixel are two examples of how we are putting the best AI in People's hands, making it super easy to use AI for a wide range of tasks just by using their camera wise or taking a screenshot.

Sundar: We are upgrading Google assistant on mobile devices to Gemini and later this year, we'll upgrade tablets cars and devices that connect to your phone such as headphones and watches.

Sundar: The pixel <unk> launched a very strong reviews, providing the best of Google's AI offerings like Gemini alive, and AI powered camera features and Gemini alive camera and screen sharing is now rolling out to all Android devices, including pixel and Samsung S 25.

Sundar: Now moving on to key highlights from across search cloud Youtube and BMO first search.

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Sundar: AI is one of the most revolutionary technologies for enabling and expanding our information mission.

Sundar: And for search we see growing the number and types of questions. We can answer.

Sundar: We are already seeing this with AI overviews, which now has more than 1.5 billion users every month.

Early a year after we launched AI all of us in the U S. We continue to see that usage growth is increasing as people learn that search is more useful for more of their queries.

Sundar: So we are leaning in heavily here continuing to all the feature out to new countries to more users into more queries.

Sundar: Building on the positive feedback for AI overviews in March we released AI mode and experiment and labs.

Sundar: It expands what AI all of US can do with more advanced reasoning thinking and multimodal capabilities to help with questions that need further exploration and comparisons.

Sundar: On average AI mold queries are twice as long as traditional search queries were.

Sundar: We're getting really positive feedback from early users about its design fast response time and ability to understand complex nuanced questions.

Sundar: We also continue to see significant growth in multimodal queries.

Sundar: Circle to search is now available on more than 250 million devices with usage, increasing nearly 40% this quarter.

Sundar: And monthly visual searches with lengths have increased by 5 billion since October.

Sundar: Moving on to cloud our cloud next we announced major innovations and over 500 company shared the business results. They are achieving by working with us.

Sundar: We provide leading cost performance and reliability for AI training and inference.

Sundar: This enables us to deliver the best value for AI leaders like any scale and contextual AI as well as global brands like Verizon and for highly sensitive data and regulatory requirements, Google distributed cloud and their sovereign AI it make gemini available on premises or in country.

Sundar: Our vertex AI platform makes over 200 foundation models available, helping customers like Lowe's integrate AI.

Sundar: We offer industry, leading models, including Gemini 2.5 Pro 2.5 Flash imagine three we owe to chirp in linear plus open source and third party models like Lamar four and anthropic.

Sundar: We are the leading cloud solution for companies looking to the new era of AI agents are big opportunity. Our agent development kit is a new open source framework to simplify the process of building sophisticated AI agents and multi agent systems.

Sundar: And agent designer as a low cost tool to build AI agents and automate tasks and over 100 enterprise applications and systems.

We are putting AI agents in the hands of employees at major global companies like KPMG.

Sundar: With Google agents space employees can find and synthesize information from within their organization.

Sundar: Converse with AI agents and take action, but their enterprise applications.

Sundar: It combines enterprise search conversational AI or chat and access to Gemini and third party agents.

Sundar: We also offer pre package agents across customer engagement coding creativity and more that are helping to provide conversational customer experiences accelerate software development and improved decision making.

Sundar: And of course, Google workspace, it delivers more than 2 billion AI assist monthly, including summarizing Gmail and defining docs.

Sundar: Lastly, our cyber security products are helping organizations detect investigate and respond to cyber security threats, our expertise coupled with integrated Gemini AI advances detects malware prioritizes threats and speeds up in Michigan workflows.

Sundar: This quarter, we were excited to announce our intent to acquire a is a leading cloud security platform that protects all major clouds and cold environments together, we can make it easier and faster for organizations of all types and sizes to protect themselves.

Sundar: And two in and across all major clouds.

Sundar: We think this will help spur more multi cloud computing something customers want.

Sundar: Next Youtube yesterday marked a historic milestone the 20th anniversary of the first video uploaded to Youtube.

Sundar: That single 19 second upload the platform has grown into a global phenomenon fundamentally changing how billions of people create share and experience content.

Sundar: Through all this growth subscriptions are now a big part of the business. We continue to diversify subscription options recently, expanding our premium light pilot to the U S, giving users a new way to enjoy most videos on Youtube ad free.

Sundar: TV is the primary device for Youtube viewing in the U S. According to Nielsen Youtube has been number one in streaming watch time in the U S for the last two years and Youtube now has over 1 billion monthly active podcast users.

Okay.

[music].

Sundar: Your music and premium reached or 125 million subscribers, including trials globally.

Speaker Change: And finally, we must now safely serving over a quarter of million paid passenger trips each week, that's up fireworks from a year ago. This past quarter BMO opened up paid service in Silicon Valley through.

Speaker Change: Through our partnership with Uber, we expanded in Austin and are preparing for a public launch in Atlanta later this summer, we recently announced the Washington D C. As a future ride hailing city going live in 2026 long sign Miami.

Speaker Change: Waymark continuous progress on two important capabilities for writers.

Speaker Change: Airport axis and freeway driving.

Philip: To all of our employees for their work this quarter. It was a great start to the year in Q2 will be even more exciting with that Philip over to you.

Philip: Thanks, Sundar and Hello, everyone.

Philip: Ill quickly cover performance for the quarter and then frame the rest of my remarks around the progress we are delivering across search and Youtube and partnerships.

Philip: <unk> services revenues were $77 billion for the quarter up 10% year on year, driven by strong growth in search and Youtube, partially offset by year on year decline in network revenues.

Philip: To add some further color to the performance.

Philip: The 10% increase in search and other revenues was led by financial services, primarily due to strength in insurance followed by retail.

Philip: Youtube saw similar performance across verticals, it's 10% growth in advertising revenues was driven by direct response, followed by brand.

We move from place to place.

It's been a wonderful ride, but as the military says it was hard to find our careers to call my own.

Philip: So let's start with search where we've seen robust growth in revenues all around the world over 2 billion people use search everyday to find information compare products or shop.

Speaker Change: With Steve retiring in a few months I have the opportunity to start my own transition into a possible at premier.

Philip: And there are more than five trillion searches on Google annually.

Philip: We've continued our efforts to help more people ask entirely new questions, bringing more opportunities for businesses to connect with consumers.

Speaker Change: [music] bye have a part time position working in retail.

Philip: And as we've mentioned before with the launch of Air Overviews, the volume of commercial queries has increased.

Speaker Change: And I knew that I needed you maybe upskill.

Speaker Change: It recently completed a premier certificate in digital marketing and E Commerce.

Philip: Q1 marked our largest expansion to date for AI overviews, both in terms of launching two new users and providing responses for more questions.

Speaker Change: I see okay.

Speaker Change: Officially official.

Philip: The feature is now available in more than 15 languages across 140 countries.

Speaker Change: Although I have the certificate and I, because I saw the scale I don't know, which rose to apply for.

Philip: Freya overviews overall, we continue to see monetization at approximately the same rate, which gives us a strong base on which we can innovate even more.

Speaker Change: Google has graduated over $1 million career certificate learners, but we've found that it's tough for some of them to figure out which starts to go for the job market is changing really rapidly and Johnson sounds are also changing.

Philip: Turning to visual of course on the last earnings call I mentioned the success, we're seeing with lens, where shoppers to use their camera or images to quickly find information in ways. They couldnt before in.

Philip: In Q1, the number of people shopping Orleans grew by over 10% and the majority of lands cores are incremental.

Speaker Change: So many variables at play and there's so much information out there and that's a place we thought it'd be really helpful and not only helping people makes sense sounds from what they bring to the table, but what's different packages for sale career.

Philip: Sundar mentioned the significant growth. We're also seeing with circle to search as multi modality continues to derive cordish across search.

Speaker Change: <unk> is an AI experiment, where we take gen AI and apply it to three exploration. It users largely was models to identify patterns and connections between people skills experiences and interests and career paths that are unique and personalized to them in.

Philip: Moving to add more businesses big and small are adopting AI powered campaigns and the deployment of AI across our ads business is driving results for our customers and for our business.

Philip: Throughout 2024, we launched several features that leverage alarms to enhance advertiser value and we're seeing this work pay off the combination of these launches now allows us to match ads to more relevant search queries and this helps advertisers reach customers in searches where we would not previously have shown there at.

Speaker Change: In addition to the data driven results from the U S Bureau of Labor Statistics, we also lean on Jim and I to help surface more emerging our creative deals.

Speaker Change: These two options.

Speaker Change: It was really important for us to familiarize ourselves with the struggles and the challenges that job seekers space. Today, So were tested with students with veterans and military spouses and modest entering the workforce.

Philip: Focusing on our customers, we continue to solve advertisers' pinpoints and find opportunities to help them create distribute and measure more performance ads infusing AI at every step of the marketing process on.

Speaker Change: Sounds cheesy, but it kind of fell magical mccreery Dreamer tool, that's really helpful. Because it was a fresh perspective into what's possible and what's out there.

Philip: On audience insights, we released new asset audience recommendations, which tell businesses the themes that resonate most with a top audiences.

Philip: Creative advertisers can now generate a broad a variety of lifestyle imagery customized to their business to better engage their customers and use them across P. Max demand Gen display and App campaigns.

Speaker Change: I do kind of feel like I am one of those young people on a college campus. He does have that life out of them that's.

Speaker Change: That's the thing that I didn't.

Speaker Change: Got it.

Philip: Additionally in P. Max advertisers can automatically source images from their landing pages and crop them, increasing the variety of their assets.

Speaker Change: It was too late.

Speaker Change: But it's.

Speaker Change: Alright.

Speaker Change: [music].

Philip: On media buying advertisers continue to see how AI powered campaign to help them find new customers and demand Gen advertisers can more precisely manage AD placements across Youtube Gmail discover and Google display network globally, and understand which assets work best at the channel level.

Speaker Change: Since the dawn of fans watching live sports has always had it.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: Got it.

Speaker Change: Yes.

Philip: Two dozens of air part improvements launched in 2024 businesses using demand Gen nausea, and averaged 26% year on year increase in conversions per dollar spend for goldstrike purchases and leads.

Speaker Change: Good.

Speaker Change: Yes.

Speaker Change: Thanks.

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Philip: And when using demand gen with product feet on average they see more than double the conversion per dollar spend year over year.

Speaker Change: Thanks.

Speaker Change: Yes.

Speaker Change: Sure.

Philip: As an example, royal Kennan combined demand Gen and Pemex campaigns to find more customers for its cat and dog food products.

Speaker Change: We look at it.

Philip: Integration resulted in a 2.7 times higher conversion rate of 70% lower cost per acquisition for purchases.

Speaker Change: Hum.

Speaker Change: Dan.

Speaker Change: Okay.

Speaker Change: Hello.

And increase the value per user by 8%.

Speaker Change: We can watch up to <unk>.

Philip: Turning to Youtube, where we saw strong growth in revenues across ads and subscriptions.

Speaker Change: As you know play.

Speaker Change: Is it.

Speaker Change: Okay.

Philip: This week, we are celebrating Youtube 20th anniversary, we're proud of its leadership as a streaming destination where people come to watch everything they love from life sports and creator produced content to shorts on podcast creators are what drives viewership and on average they upload 20 million videos a day to Youtube.

Speaker Change: Yeah sure.

Speaker Change: No television like Youtube.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: [music] assumes.

Philip: Our biggest creators generate a level of fandom and viewer engagement around large cultural moments on Youtube that brands can find anywhere else during March madness brands aligned not only with clips and highlights from the game, but also with the creators would drive basketball culture like gesture and the ringers Jay came in in.

Speaker Change: Sure.

Speaker Change: [music].

Philip: In Q1, the growth of our reservation based ads business more than doubled year over year.

Philip: Brands and creators continue to use the opportunities that collaborations and partnerships offer.

Speaker Change: Yes.

Philip: To you to work with Zach King the King of short magical videos with over 42 million follow us to take over his channel.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Philip: The creator takeover and accompanying crater add lifted to euro brand awareness by 25% compared to a control group and 9% compared to the Toyota brand at.

Philip: Looking at shorts engaged views grew by over 20% in the first quarter. We continue to be pleased with the progress we're making globally in shorts monetization relative to in stream viewing and are particularly encouraged by the trend in the U S.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Philip: As always I'll wrap up with a strong momentum we're seeing in partnerships, where our customers increasingly recognize the strength and breadth of what Google has to offer.

Speaker Change: Okay.

Speaker Change: [music].

Philip: For instance, roadblocks is partnering with Google AD manager to bring immersive ads to gamers.

Philip: Gen Z gamers or roadblocks biggest users and thanks to our partnership advertisers will be able to reach this audience with ads that blends seamlessly into the gaming experience.

Speaker Change: Youre welcome.

Speaker Change: You can't Jack stage, who are you you'll always show girl Cuba.

Speaker Change: Got it.

Philip: We also launched a Youtube shorts effect to help people release iconic roadblocks heads and inspire fans to create content at scale.

Speaker Change: Okay, and then just talking stage with this girl you mean, the Texas. It's the same thing you don't get to talk in Jackson.

Speaker Change: She's got an iPhone. So I just don't think this is going to work.

In closing I'd like to thank googlers everywhere for their contributions and commitment to our success and to our customers and partners for their continued trust are not over to you.

Speaker Change: He is better Benoit answer the Nacho just hot react really yeah.

Speaker Change: Alright.

Speaker Change: Now it's time for you to stand up.

Speaker Change: Thank you Philip My comments will focus on year over year comparisons for the first corner unless I state otherwise I.

Speaker Change: Yes Pete.

Speaker Change: Isn't that a bit forward your space.

Speaker Change: Jello to Houston.

Speaker Change: I will start with the results at the alphabet level and will then cover our segment results.

Speaker Change: No not that much.

Speaker Change: Okay.

Have you ever seen as alpha.

Unknown Attendee: Transcription by CastingWords It's been a wonderful ride. But as a military spouse, it was hard to find a career to call my own. With Steve retiring in a few months, I have the opportunity to start my own transition into a possible career. I have a part-time position working in retail. And I knew that I needed to maybe upscale. So I recently completed the Google career certificate in digital marketing and e-commerce. I feel officially official. Although I have the certificate and I possess all the skills, I don't know which roles to apply for. Google has graduated over 1 million career certificate learners, but we found that it's tough for some of them to figure out which jobs to go for.

Speaker Change: And with some commentary on our outlook for the second quarter and 2025.

Speaker Change: [music] should take pressure off this week.

Speaker Change: We had another strong quarter in Q1 consolidated revenues of $90.2 billion increased by 12% or 14% in constant currency.

Speaker Change: Yes.

Speaker Change: Great.

Speaker Change: Searching Youtube advertising subscription platforms and devices and Google cloud each had double digit revenue growth this quarter, reflecting strong momentum across the business.

Speaker Change: Looking at the book.

Speaker Change: Can you guys talk about.

Speaker Change: To celebrate.

Speaker Change: The brand's ancipital down dip around would you pulled yet.

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Speaker Change: Total cost of revenue was $36 $4 billion up 8%.

Speaker Change: Yeah.

Speaker Change: Everything at a certain point.

Speaker Change: Thanks.

Speaker Change: <unk> was $13 $7 billion up 6%.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: We continue to see a revenue mix shift with Google search growth at double digit levels, while network revenues, which have much higher Tac rate declined.

Speaker Change: Uh huh.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay.

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Speaker Change: Other cost of revenue was $22 $6 billion up 9% with the increase primarily driven by content acquisition costs largely for Youtube, followed by depreciation and other technical infrastructure operations costs.

Speaker Change: Sure.

Speaker Change: That's correct.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Unknown Attendee: The job market is changing really rapidly. And jobs themselves are also changing. There's so many variables at play. And there's so much information out there. And that's a place we thought AI could be really helpful in not only helping people make sense of what they bring to the table, but what different paths they could pursue. CareerDreamer is an AI experiment where we take gen AI and apply it to career exploration. It uses large language models to identify patterns and connections between people's skills, experiences and interests, and different career paths that are unique and personalized to them.

Speaker Change: Yes.

Speaker Change: Total operating expenses increased 9% to $23 $3 billion.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: R&D investments increased by 14%, primarily driven by increases in compensation and depreciation expenses.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Got it.

Speaker Change: Right.

Speaker Change: Sales and marketing expenses decreased 4%, primarily reflecting a decline in compensation expenses.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: G&A expenses increased by 17%.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Reflecting the impact of charges for legal and other matters.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Operating income increased 20% this quarter to $31 billion and operating margin increased to 33, 9% representing two points three points of margin expansion.

Speaker Change: Yeah.

Speaker Change: Yes.

Unknown Attendee: In addition to the data-driven results from the US Bureau of Labor Statistics, we also lean on gen AI to help surface more emerging or creative fields. It was really important for us to familiarize ourselves with the struggles and the challenges that job seekers face today. So we tested with students, with veterans, with military spouses and moms, reentering the workforce. It sounds cheesy, but it kind of felt magical. The CareerDreamer tool is really helpful because it was a fresh perspective into what's possible and what's out there. I do kind of feel like I am one of those young people on a college campus who does have their life ahead of them.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Operating margin benefited from healthy revenue growth, a moderated pace of compensation growth and a favorable mix shift towards lower tech advertising revenues.

Speaker Change: Yes.

Speaker Change: [music] were scattered all over the globe.

Speaker Change: I was just trying to get everyone to collaborate.

Speaker Change: Keeping up with my E Mail has always been really really difficult is there anything more intimidating than a blank white pitch, but where do you begin it's more important than ever that you have tools to work more quickly and efficiently together.

Speaker Change: Partially offset by year on year increase in depreciation expenses of just over $1 billion.

Speaker Change: Other income and expenses was $11.2 billion, primarily due to unrealized gain on our non marketable equity securities related to our investment in a private company, which we noted in our 10-K is a subsequent event.

Speaker Change: [music] using help me right, we were able to save 35 hours a month for a product descriptions for our website.

Speaker Change: Net income increased 46% to $34 $5 billion and earnings per share increased 49% to $2.81.

Unknown Attendee: That's the thing that I didn't, but I thought it, I thought I was too late.

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Unknown Attendee: , Microsoft Office Word Document MSWordDoc Word.Document.8 Since the dawn of fan, watching live sports has always had it's... challenge. It Guess What I Wanna Say Is realized in the next arc. Group, Almanac, Aligot, Thank you for watching and please subscribe!

Speaker Change: We delivered free cash flow of $19 billion in the first quarter and $74 $9 billion for the trailing 12 months, we ended the quarter with $95 billion in cash and marketable securities.

Speaker Change: When you are developing a DAC or a pitch for a client and you're coming up with ideas and you need to visually manifestos idea that used to take days and now with the right pumps, we can do that in ours.

Speaker Change: Turning to segment results, Google services revenues increased 10% to $77.3 billion, reflecting strength in Google search and Youtube advertising is subscription.

Speaker Change: [music], we have to worry less about security because we know Google has are back with security played a big part of the decision to move from the legacy on premise tools, such as Google Workspace.

Speaker Change: Search and other advertising revenues increased by 10% to $57 billion.

Speaker Change: The robust performance of search was once again broad based across verticals led by financial services due primarily to strength in insurance followed by retail.

Speaker Change: The impact of Gemini for workspace and our business has been really transformative.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Youtube advertising revenues increased 10% to $8 $9 billion driven by direct response advertising followed by brand.

Speaker Change: Network advertising of $7 $3 billion were down 2%.

Speaker Change: Subscription platforms and device revenues increased 19% to $10.4 billion, primarily reflecting growth in subscription revenues.

Speaker Change: Hey, good one about my resume and complicated instructions that photo intersect sure just add it and we'll talk.

Unknown Attendee: There's no TV like YouTube.

Speaker Change: When you take a look at this giant hold that hold is easier to repair than it looks.

Speaker Change: This growth was primarily driven by Youtube subscription offering followed by Google one with growth in the number of subscribers being the biggest driver of revenue growth.

Speaker Change: Maybe we should tell you that no it backwards, there's not backwards jevan I wish weighted the screws go according to these instructions they face towards the backboard.

Unknown Attendee: IAMC, Microsoft Office Word 10.0 IAMC Title Microsoft Office Word Document MSWordDoc Word.Document.8 www.overhawk.co.uk Hello, madame. You can't text that. Who are you? You know it's your girl. Cupid. Shouldn't she be wearing, like, a diaper? Okay, I'm in the talking stage with this girl. You mean the texting stage. It's the same thing. You don't get to talking if you ain't good at texting. She's got an iPhone, so I just don't think this is gonna work. Texting is better between Android and iPhone. Just hire me. Really? Yeah, babe. All right. Done.

Speaker Change: Google services operating income increased 17% to $32 $7 billion and operating margin increased from 39, 6% to 42.3%.

Speaker Change: Yes, okay its back with <unk>.

Speaker Change: Yeah.

Speaker Change: Okay, let's talk about how to get rid of that Spider run that back Gemini. This document is not a resume its a grocery list.

Speaker Change: Well take a look at the photo of my objective let.

Turning to the Google Cloud segment, which continued to deliver theory strong results this quarter.

Speaker Change: Let me know what kind of shoes are compared with the green on the left can add a sense of calm.

Speaker Change: <unk> increased by 28% to $12 $3 billion in the first quarter, reflecting growth in G. C. P across core and AI products at a rate that was much higher than cloud overall revenue growth rate.

Speaker Change: How about the stuff yeah, we definitely need some help okay. Let's go back to step three step three.

Speaker Change: To do this.

Speaker Change: The Ding Ding.

Speaker Change: Innovation is deeply ingrained in the spirit of America.

Speaker Change: Growth in Google Workspace was primarily driven by an increase in average revenue per seat.

Speaker Change: This country was built by doers risk takers pioneers.

Speaker Change: They'll go cloud operating income increased to $2 $2 billion and operating margin increased from nine 4% to 17, 8%.

Speaker Change: And technology has always helped America push ahead and break new ground.

Speaker Change: Google started as a search engine, but over the decades. It's also become an engine of growth for millions of Americans.

Speaker Change: As we scale our fleet, we continue to focus on driving improvements in productivity efficiency and utilization to offset the growth in expenses, particularly from higher depreciation.

Speaker Change: Today Americans are moving forward and new ways to help with Google's AI technology like helping thousands of startups from aerospace to agriculture.

Speaker Change: Extra other bets for the first quarter revenues were $450 million in operating loss was $1 2 billion.

Speaker Change: Building cyber defense programs with the department of defense to keep our vital system secured.

Speaker Change: The year on year decline in revenue and increase in operating loss, primarily reflects the milestone payment received in the first quarter of 'twenty 'twenty four for one of our other bets.

Speaker Change: And accelerating new scientific discoveries and cancer research.

Speaker Change: With respect to Capex, our reported Capex in the first quarter was $17 $2 billion, primarily reflect investments in our technical infrastructure with the largest component being investment in servers, followed by data centers to support the growth of our business across Google services, Google Cloud and Google Deep mind.

Speaker Change: Through partnership and the power of AI, we're helping drive a new era of American innovation.

Speaker Change: So at my last job I was.

Speaker Change: Working across several different groups.

Speaker Change: Sure.

Speaker Change: Let me practice that one again, okay, when you're ready tell me about the job that's how you the most.

Speaker Change: In Q1, we returned value to shareholders in the form of $15.1 billion in share repurchases and $2 $4 billion in dividend payments.

Speaker Change: Uh huh.

Unknown Attendee: Now, it's time for you to send a high-res pitch. Isn't that a bit forward? Um, your face? Okay. Show a little teeth, too. Ooh, not that much. Now relax. Okay. Have you ever seen yourself in the phone?

Speaker Change: Yeah.

Speaker Change: [music] well it was a role where I learned to take constructive criticism.

Speaker Change: As we announced today our board of directors declared a 5% increase in our quarterly dividend and also approved a new $70 billion share repurchase authorization.

Speaker Change: Okay, I got pretty used to.

Speaker Change: Working long hours.

Speaker Change: Small to usage.

Speaker Change: Very comfortable.

Speaker Change: Yes.

Speaker Change: Turning to our outlook I would like to provide some commentary on several factors that will impact our business performance in the second quarter and the remainder of 2025.

Speaker Change: To become really organized.

Speaker Change: Try rephrasing your answer to sound more confident right right. Okay.

Unknown Attendee: Microsoft Office Word Document MSWordDoc Word.Document.8 , Microsoft Office Word Document MSWordDoc Word.Document.8 , & Other American Typewriters.

Speaker Change: I was asked to make a lot of quick decisions.

Speaker Change: First in terms of revenue I'll highlight a couple of items that we mentioned last quarter that will have an impact on second quarter and 2025 revenue.

Speaker Change: And do a lot of negotiating one more.

Speaker Change: Can you talk about your experiences working with others.

Speaker Change: First in global services advertising revenue in 2025 will be impacted by lapping the strength, we experienced in the financial services vertical throughout 2024.

Speaker Change: And then my best and are collaborating.

Speaker Change: For the team will do whatever it takes.

Speaker Change: Job description you shared dimensions on the job training.

I am a fast.

Speaker Change: Second in cloud, we're in a tight demand supply environment and given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates, depending on capacity deployment each quarter.

Speaker Change: I don't always have all the answers.

Speaker Change: I'm going to get the job done.

Speaker Change: Yes.

Speaker Change: No matter how long it takes.

Speaker Change: And I'm not afraid to admit when I'm wrong.

Speaker Change: We expect relatively higher capacity deployment towards the end of 2025.

Speaker Change: But most importantly, I show up every day.

Speaker Change: Moving to investments starting with our expectation for Capex for the full year 2025.

Speaker Change: No matter what.

Speaker Change: Alright, and last question when it comes to.

Speaker Change: We still expect to invest approximately $75 billion in Capex this year.

Speaker Change: Motivate you.

Speaker Change: Sure.

Speaker Change: I guess.

Speaker Change: The expected Capex investment level may fluctuate from quarter to quarter due to the impact of changes in the timing of deliveries and construction schedules.

Speaker Change: Sure.

Speaker Change: <unk>.

Speaker Change: Can depend on.

Speaker Change: [music] annoying I can depend on them.

Unknown Attendee: Thank you for watching.

Speaker Change: In terms of expenses first as I mentioned on our previous earnings call. The significant increase in our investments in Capex over the past few years, we will continue to put pressure on the P&L, primarily in the form of higher depreciation in.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: That's a great answer it sounds like Youre ready.

Speaker Change: In the first quarter, we saw 31% year on year growth in depreciation from the increase in technical infrastructure assets placed in service.

James: Hi, James Thanks for joining us and it's good to see you all and looking forward to talking.

Speaker Change: Yes.

Speaker Change: Given the increase in Capex investments over the past few years, we expect the growth rate in depreciation to accelerate throughout 2025.

Speaker Change: Okay.

Unknown Attendee: http://www.facebook.com.com We are scattered all over the globe. It's just bonkers to try to get everyone to collaborate. Keeping up with my email has always been really, really difficult. Is there anything more intimidating than a blank white page? But where do you begin? It's more important than ever that you have tools to work more quickly and efficiently together. Using Help Me Write, we're able to save 35 hours a month for product descriptions for our website. We are leveraging Meet to take notes, summarize them, and generate action items after the so that we can be really present and focus on the content.

Speaker Change: So.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Second as we've previously said, we expect some head count growth in 2025 in key investment area as we disclosed previously due to a shift in the timing of our annual employee stock based compensation awards beginning in 2023.

Speaker Change: Okay.

Speaker Change: So why not.

Speaker Change: Just two words, but those two words challenge everything.

Speaker Change: And can change any.

Speaker Change: Our first quarter stock based comp expenses is relatively lower compared to the remaining quarters of the year in.

Speaker Change: Yeah.

Speaker Change: Why not help find a cure.

Speaker Change: Bring it here.

Speaker Change: In conclusion as you heard from Sundar and fill it we're pleased with the progress we're making across the organization the results for the quarter and the opportunities ahead.

Speaker Change: There.

Speaker Change: Right.

Yes.

Speaker Change: We are building the most helpful.

Speaker Change: So you can turn an idea into an enterprise.

Speaker Change: Our success as a company is grounded in our experience driving advancements in deep computer science that enables us to create innovative new products and services for users businesses and partners around the world.

Speaker Change: If the rate drops into this box.

Speaker Change: Breakfast on the team.

Second 800000 packages a day.

Speaker Change: Protect our powertrain.

Speaker Change: We have a strong track record of incubating and then building these offerings into new profitable businesses for alphabet.

Speaker Change: Because once we turn this into that.

Speaker Change: What else can we do find out where the wild things are.

Unknown Attendee: When you're developing a deck or a pitch for a client and you're coming up with ideas and you need to visually manifest those ideas, that used to take days. And now with the right prompts, we can do that in hours. We have to worry less about security because we know Google has our back. Security played a big part of the decision to move from the legacy on-premise tool set to Google Workspace.

Speaker Change: As we announced last quarter Youtube and cloud exited 'twenty 'twenty, four and a combined annual run rate of $110 billion.

Speaker Change: Wilder.

Speaker Change: Patterns upon data.

Speaker Change: This is Jack.

Speaker Change: <unk> thousand customer service now.

And as you heard from Sundar earlier whaler is continuing to progress in building on its impressive technological achievements to scale rapidly and develop a sustainable business model. Thank.

Speaker Change: Hello.

Speaker Change: Well.

Speaker Change: Yeah.

Speaker Change: Make it happen.

Speaker Change: Yes.

Speaker Change: Thank you Sundar, Philip and I will now take your questions.

Unknown Attendee: The impact of Gemini for Workspace in our business has been really transformative.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.

Speaker Change: [music].

Speaker Change: Prevent any background noise, we ask could you. Please mute your line. Once your question has been stated.

Unknown Attendee: Hello? Hi, I'm Gemini. So, what do I do? Just talk? You can ask me about anything. Anything at all? Hmm. What about? My resume? These complicated instructions? That's what I just said? Sure, just add it and we'll talk.

Speaker Change: And our first question comes from Brian Nowak from Morgan Stanley. Your line is now open.

Brian Nowak: Great. Thanks for taking my questions I have two the first one on sort of the macro advertising backdrop, maybe I'm not I know its April 24th and you called out some factors as you kind of thinking about the second quarter any other factors youre seeing in advertising verticals or regions or categories that could be a showing any signs of weakness quarter dates.

Speaker Change: Okay.

Unknown Attendee: Can you take a look at this giant hole? That hole is easier to repair than it looks. Maybe we should call your dad. No, it's backwards. It is not backwards. Gemini, which way do the screws go? According to these instructions, they face towards the backboard. Yeah, okay, it's backwards.

Speaker Change: [music].

Brian Nowak: Should think through any other changes from typical seasonality in <unk> 25 versus prior quarters and then the second one I'm Philip I think I heard you mentioned that the volume of commercial queries has increased maybe can you just walk us through which of the products are driving that increase in commercial queries and then as you sort of think about the <unk>.

Unknown Attendee: Okay, let's talk about how to get rid of that spider. Run that back, Gemini.

Unknown Attendee: This document is not a resume, it's a grocery list. Take a look at the photo of my outfit. Let me know what color shoes would look good with it. The green on the left can add a sense of calm.

Brian Nowak: Pipeline of search products are there any others that you're particularly excited about the kind of continue to drive further commercial query growth throughout 'twenty five 'twenty six.

Unknown Attendee: Go back a step. Yeah, we definitely need some help. Okay, let's go back to step three. We're only on step three?

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: So let me take the first one as well we saw broad based strength across AD verticals in Q1, and we saw it gives you a bit of vertical color here. A surge was led again by finance due primarily primarily to ongoing strength in the insurance retail health care and travel.

Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Unknown Attendee: Innovation is deeply ingrained in the spirit of America. This country was built by doers, risk takers, pioneers, and technology has always helped America push ahead and break new ground. Google started as a search engine, but over the decades, it's also become an engine of growth for millions of Americans. Today, Americans are moving forward in new ways, with the help of Google's AI technology. Like helping thousands of start-ups from aerospace to agriculture. Building cyber defense programs with the Department of Defense to keep our vital systems secure. and Accelerating New Scientific Discoveries and Cancer Research.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: She also sizable contributors here to growth.

Speaker Change: With regard to Q2, we were only a few weeks and so it's really too early to comment I mean, we're obviously not immune to the macro environment.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: But we wouldn't want to speculate about potential impacts beyond noting that the changes to the de Minimis exemption will obviously cause a slight headwind to our ads business in 2025, primarily from APAC based.

Speaker Change: Yeah.

Speaker Change: Welcome everyone.

Speaker Change: Thank you for standing by for the alphabet first quarter 2025 earnings Conference call.

Speaker Change: Retailers and maybe zoom out I would say, we have a lot of experience in managing through uncertain times, and we focus on helping our customers.

Speaker Change: At this time.

Speaker Change: Participants are in a listen only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: By providing deep insights into changing consumer behavior that is relevant to their business are examples of our auction dynamics core trend insights on topics like replacement purchases and so on.

Unknown Attendee: Through partnership and the power of AI, we're helping drive a new era of American So, at my last job, I was working across several different groups, you know what, let me practice that one again. Okay.

Speaker Change: Ask a question during this session you will need to press star one on your telephone.

Speaker Change: I would now like to hand, the conference or Whats your speaker today, Jim Friedland Senior director of Investor Relations. Please go ahead.

Speaker Change: So we have a lot of experience in this area.

Speaker Change: On the commercial core side.

Speaker Change: Look <unk> has continued to drive higher satisfaction and search users and as I noticed Q1 was really our largest expansion to date for Ya overviews. Both in terms of launching two new users and providing responses for more questions. Since that's really the core already off the answer a overview sits at the center of your question here and when it comes.

Sundar Pichai: Thank you good afternoon, everyone and welcome to the alphabet first quarter 2025 earnings conference call with US today are Sundar Pichai Philipp Schindler Ashkenazi.

Unknown Attendee: When you're ready, tell me about the job that taught you the most. Okay. Well, it was a role where I learned to take constructive criticism. I got pretty used to, you know, working long hours with a small team. I got very comfortable multitasking.

Speaker Change: 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.

Speaker Change: To your other products look I don't want to speculate on this but we're happy with what we're seeing here on a overviews and.

Unknown Attendee: And I had to become really... Not bad, but try rephrasing your answer to sound more confident. Right, right. Okay. I was asked to make a lot of quick decisions and do a lot of negotiating.

Speaker Change: I'm confident.

Speaker Change: 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.

We can expand this to more products over time.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: 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 Dot X Y Z forward Slash investor.

Unknown Attendee: One more thought. Sure. Talk about your experiences working with others. Oh, well, I'm at my best when I'm collaborating. If it's for the team, I'll do whatever it takes. Nice job, man.

Speaker Change: Our next question is from Doug <unk> from Jpmorgan. Your line is now open.

Doug: Great. Thanks for taking my questions.

Speaker Change: So maybe just to go back to.

Speaker Change: Overviews for a moment.

Unknown Attendee: Conventions on the job training. Well, I am a fan. I don't always have all the answers. I'm not afraid to admit when I'm wrong. but most importantly, I show up every day, no matter what.

Speaker Change: Tell us how we should think about the one and a half billion AI overviews users just in terms of breadth of rollout and I know youre, saying monetization at approximately the same rate.

Speaker Change: Our comments will be on year over year comparisons unless we state otherwise.

Sundar Pichai: And now I will turn the call over to Sundar.

Speaker Change: What does that mean in terms of click through rates and conversion and then not.

Sundar Pichai: Thanks, Jim Good afternoon, everyone. We are pleased with our strong results. This quarter, we continued to see healthy growth and momentum across the business, including AI powering new features.

Speaker Change: I'm just curious if theres been any changes to google's approach to Durably reengineering the cost base since you joined and if macro weakens and we see more of a slowdown would you expect.

Sundar Pichai: In search we saw continued double digit revenue growth AI all of US is going very well with over $1 5 billion users per month, and we are excited by the early positive reaction to AI mode. There's a lot more to come ahead.

Unknown Attendee: All right, last question. When it comes to work, what motivates you? And knowing I can depend on them.

Speaker Change: To find additional opportunities to cut back more on costs. Thank you look on the ads.

Speaker Change: In AI overuse last late last year actually we launched them with India overviews on mobile in the U S and this builds on our previous rollout of ads Buffon beautiful. So this was a change we have but as I talked about it before for <unk> overall, we see the monetization at approximately the same rate, which gives us a strong base on which we can innovate.

Sundar Pichai: And subscriptions, we surpassed 270 million options with Youtube and Google One S key drivers.

Sundar Pichai: And cloud grew rapidly with significant demand for our solutions and you saw our leadership in AI cloud next across infrastructure agents anymore.

Unknown Attendee: That's a great answer, sounds like you're ready.

Speaker Change: Even more so I'm very happy with US I don't think this is the moment to go into the details of fixed rates and conversion and so on but overall, where we're happy with what we're seeing.

Sundar Pichai: Our differentiated full stack approach to AI continues to be central to our growth. This.

Unknown Attendee: Hey James, thanks for joining us. It's good to see you all. I've been looking forward to talking.

Sundar Pichai: This quarter was super exciting that we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance and it's widely recognized as the best model in the industry.

And to your question on our approach to productivity and efficiency. It hasn't really changed I've mentioned my approach and our approach as a company on AR at the end of 2024.

Sundar Pichai: That's an extraordinary foundation for our future innovation and we are focused on bringing this to people and customers everywhere.

Speaker Change: And we're still focused on driving efficiency and productivity throughout the organization both in our operating expenses and in our Capex I've mentioned some of these on my during my prepared remarks.

Unknown Attendee: Why not? Just two words, but those two words challenge everything and can change Why not help find a cure? Bring it here and even there.

Sundar Pichai: Looking ahead to I O brand cast and Google marketing live I.

Sundar Pichai: I can't wait for our teams to showcase the innovations they have been working on.

Sundar Pichai: Turning to our progress this quarter, which continues to enable significant growth opportunities.

Speaker Change: But certainly this helps us as we think about the investments we need to make in innovation to drive long term sustainable growth profile for the company, we're able to repurpose. Some of these efficiencies into these investments as well is as you think about the increase in Capex, we've seen over the past several years and what we're investing this year.

Sundar Pichai: The elements of the AI stack I've previously mentioned, our AI infrastructure World class research, including models and tooling and our products and platforms.

Unknown Attendee: Wait, really? Yes, really.

Unknown Attendee: We're building the most helpful AI so you can turn an idea into an the right crops into this box. on the Table.

Sundar Pichai: Starting with AI infrastructure are long term investments in our global network have positioned us well.

Speaker Change: This will put additional pressure on the income statement in the form of depreciation so we're working hard to try and offset some.

Speaker Change: Cougars network is robust and resilient supported by over 2 million miles of fiber and 33 subsea cables.

Unknown Attendee: Infect 800,000 packages a day and help protect our power grids. Because once we've turned this into that, we ask, what else can we do?

Speaker Change: Some of these headwinds as well as within the Capex investments themselves.

Speaker Change: Complementing this we offer the industry's widest range of Gpus, and Gpus and continue to invest in next generation capabilities.

Speaker Change: $75 billion, we're looking at how do we make sure every dollar is used efficiently we have a highly rigorous process to determine the demand behind it and then the allocation of that the computer associate with our technical infrastructure investments, ensuring that we're utilizing that appropriately and we're highly efficient with everything we're doing.

Unknown Attendee: Find out where the wild things are, uh, wilder. Spot patterns and crime data, catch phishing attacks, make 1,000 customer service calls an hour.

Speaker Change: Ironwood, our seventh generation TPU and most powerful to date is the first designed specifically for inference at scale.

Speaker Change: It delivers more than 10 X improvement in compute power or a recent high performance TPU, while being nearly twice as power efficient.

Speaker Change: <unk> seen some of the announcement and some of the changes, but we're focusing on continued to moderate the pace of compensation growth.

Unknown Attendee: and Make It Happen.

Speaker Change: Our strong relationship with Nvidia continues to be a key advantage for us and our customers.

Speaker Change: Looking at our real estate footprint and again, the build out and utilization of our technical infrastructure.

Speaker Change: We were the first cloud provider to offer Nvidia is groundbreaking b 200, and GBP 200 Blackbird Gpus.

Speaker Change: Across the business.

Speaker Change: And we'll be offering their next generation <unk> Gpus.

Speaker Change: Great. Thank you both.

Speaker Change: Second this infrastructure parts of our World class research, including our industry leading models.

Speaker Change: Thank you.

Unknown Attendee: Thank you for watching. , Microsoft Office Word Document MSWordDoc Word.Document.8 , Microsoft Office Word Document MSWordDoc Word.Document.8 Welcome, everyone.

Speaker Change: <unk> comes from Eric Sheridan from Goldman Sachs. Your line is now open.

Speaker Change: We released Gemini 2.5 pro last month, receiving extremely positive feedback from both developers and consumers too.

Speaker Change: Thank you for taking the questions first maybe for Sundar.

Speaker Change: If you look across the consumer AI landscape today, how are you thinking about continuing to drive differentiation for Gemini is the platform through the lens of usage utility or putting product innovation at the forefront of driving consumer habits and the second one may be for naught.

2.5 pro state of the art on a wide range of benchmarks and debuted at number one on the chatbot arena by a significant margin.

Speaker Change: 2.5 pro achieved big leaps and reasoning coding science and math capabilities opening up new possibilities for developers and customers Act.

Speaker Change: Active users and AI studio in Gemini API have grown over 200% since the beginning of the year.

Speaker Change: If the macro environment were to change and become more downwardly volatile how should investors think about the investments that are must make this year almost fixed in nature versus where there might be more flexibility.

Speaker Change: And last week, we introduced 2.5 flash, which enables developers to optimize quality and cost.

Speaker Change: Our latest image and video generation models imagine three and we owe to our rolling out broadly and are powering incredible creativity.

Speaker Change: To alter the investment priorities of the company if the macro environment were to worsen. Thank you so much.

Speaker Change: Thanks, Eric.

Speaker Change: Turning to open models, we launched geometry last month delivering state of the art performance for its size Jama models have been downloaded more than 140 million tonnes.

Speaker Change: Obviously, it's an exciting moment on the AI front I think the foundation for everything is obviously the frontier model progress, we're seeing in particularly with 2.5 pro and Flash I think we are about the position we are seeing.

Speaker Change: Lastly, we are developing AI models in new areas, where there's enormous opportunity.

Speaker Change: For example, our new Gemini robotics models.

Speaker Change: <unk> tremendous reception from developers enterprises and consumers too.

Speaker Change: And in Health, we launched EA course scientist a multi agent AI research system. While also fold is now being used by over 2.5 million researchers.

Speaker Change: And obviously, we are delivering consumer AI experiences.

Ross: Ross our product portfolio.

Speaker Change: Including.

Speaker Change: The primary way people experience. It is obviously in search with AI all of US in very early days with AI mode, but that will be a consumer AI forward experience and.

Speaker Change: Third turning to products and platforms, all 15 of our products with the half a billion users now use Gemini models.

Speaker Change: Android and pixel are two examples of how we are putting the best AI in People's hands, making it super easy to use AI for a wide range of tasks just by using their camera wise are taking a screenshot.

Speaker Change: We're already seeing a very positive feedback queries are.

Speaker Change: You know people are typing in roughly two weeks longer queries compared to Ah.

James Friedland: Thank you for standing by for the Alphabet 3rd Quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star 1 on your telephone.

Speaker Change: Traditional search so.

Speaker Change: We are upgrading Google assistant on mobile devices to Gemini and later this year, we'll upgrade tablets cars and devices that connect to your phone such as headphones and watches.

Speaker Change: There's a lot of excitement there and in the Gemini App, but which you asked about.

Speaker Change: We've really seen increased momentum, particularly over the last few weeks SBU rolled it out not just the newer models.

The pixel <unk> launched a very strong reviews, providing the best of Google's AI offerings like Gemini life and AI powered camera features and Gemini live camera and screen sharing is now rolling out to all Android devices, including pixel and Samsung S 25.

Speaker Change: But we are seeing users are really responding well to all of the innovation Gemini life, which is based on project faster.

James Friedland: I would now like to hand the conference over to our speaker today, Jim Friedland, Senior Director of Investor Relations. Thank you.

Has been very well received deep research.

Speaker Change: Based on 2.5 pro is soda and that's been well received and canvas you've had a lot of traction as well.

Sundar Pichai: Good afternoon, everyone, and welcome to Alphabet's first quarter 2025 earnings conference call. With us today are Sundar Pichai, Philipp Schindler, Anat Ashkenazi.

Speaker Change: Now moving on to key highlights from across search cloud Youtube invaluable first search.

Speaker Change: So we are definitely investing more we would be.

Speaker Change: AI is one of the most revolutionary technologies for enabling and expanding our information mission.

Unknown Attendee: 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. Actual results could differ materially. Please refer to our forms 10-K and 10-Q, including the risk factor. We undertake no obligation to update any forward-looking statements.

Speaker Change: Recently organized ourselves better to capitalize on this momentum and I'm excited about our roadmap there.

Speaker Change: And for search we see it growing the number and types of questions. We can answer.

Speaker Change: And on the investments this year and overall should there be any macroeconomic changes.

Speaker Change: We're already seeing this with AI all of US, which now has more than 1.5 billion users every month.

Speaker Change: Early a year after we launched AI all of us in the U S.

Speaker Change: As I said, we're still planning to invest approximately 75 billion in Capex. This year, we do see a tremendous opportunity ahead of us across the organization, whether it's the support Google services cloud and Google Deep mine.

Speaker Change: To see that usage growth is increasing as people learn that search is more useful for more off their queries.

Speaker Change: So we're leaning in heavily here continuing to all the feature out to new countries to more users into more queries.

Speaker Change: I have stated on the Q4 call that we exited the year in cloud specifically with more customer demand than we had capacity.

Unknown Attendee: 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.

Speaker Change: Building on the positive feedback for AI all of US in March we released AI mode and experiment and labs.

Speaker Change: And that was the case this quarter as well so we want to make sure we ramp up to support customer needs and customer demands.

Speaker Change: It expands what AI all of US can do with more advanced reasoning thinking and multimodal capabilities to help with questions that need further exploration comparisons.

Speaker Change: Having said that we're investing in long term and we're investing in innovation, that's the essence of our business.

Speaker Change: On average AI more queries are twice as long as traditional search queries.

Speaker Change: And we wanted to do it in a responsible fashion so you've seen us over the past.

Sundar Pichai: And now, I'll turn the call over to Sundar. Thanks, Jim. Good afternoon, everyone. We are pleased with our strong results this quarter. We continue to see healthy growth and momentum across the business, including AI powering new features. In search, we saw continued double-digit revenue growth. AI overviews is going very well with over 1.5 billion users per month, and we are excited by the early positive reaction to AI mode. There's a lot more to come ahead. In subscriptions, we surpassed 270 million subscriptions with YouTube and Google One as key drivers. And cloud grew rapidly with significant demand for our solutions.

Speaker Change: We're getting really positive feedback from early users about its design fast response time and ability to understand complex nuanced questions.

Speaker Change: A couple of years and we're continuing to do this and you're seeing this in our results drive efficiency and productivity throughout the business.

Speaker Change: And you know, we've announced things such as consolidation of teams, which helps not just with cost, but with velocity and speed, we're able to get things to market faster. So that's one of the areas, where we're focused on and you heard from some there at the last couple of calls when just a rapid pace of innovation, we're bringing to the marketplace. So the way we're doing this across the business to drive productivity.

Speaker Change: We also continue to see significant growth in multimodal queries.

Speaker Change: The search is now available on more than 250 million devices with usage, increasing nearly 40% this quarter.

Speaker Change: And monthly visual searches with lengths have increased by 5 billion since October.

Speaker Change: Moving on to cloud our cloud next we announced major innovations and over 500 company shared the business results. They are achieving by working with us.

Speaker Change: [noise] inefficiency should help us have a more resilient organization irrespective of macroeconomic condition, but certainly we don't ignore that we always look at what's happening outside the work of the organization as well as inside that invest appropriately to drive both the short term growth as well as the long term growth.

Sundar Pichai: And you saw our leadership in AI at Cloud Next across infrastructure, agents, and more. Our differentiated, full-stack approach to AI continues to be central to our growth.

Speaker Change: We provide leading cost performance and reliability for AI training and inference.

Speaker Change: This enables us to deliver the best value for AI leaders like any scale and contextual AI as well as global brands like Verizon and for highly sensitive data and regulatory requirements, Google distributed cloud and our sovereign AI make gemini available on premises or in country.

Speaker Change: Thank you.

Sundar Pichai: This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance, and it's widely recognized as the best model in the industry. That's an extraordinary foundation for our future innovation. And we are focused on bringing this to people and customers everywhere.

Speaker Change: Our next question comes from Ross Sandler from Barclays. Your line is now open.

Speaker Change: Oh, great. Thanks, one for Sundar one for Sundar.

Speaker Change: Sundar It was disclosed this week.

Speaker Change: Our vertex AI platform makes over 200 foundation models available, helping customers like Lowe's integrate AI.

Speaker Change: In the trial, that's going on that Jim and I have 35 million da use and I'm just.

Sundar Pichai: Looking ahead to IO, Brandcast, and Google Marketing Live, I can't wait for our teams to showcase the innovations they've been working on.

Speaker Change: We offer industry, leading models, including Gemini 2.5 Pro 2.5 Flash imagine three we owe to chirp in linear plus open source and third party models like Lamar for an entropic.

Speaker Change: You got that number.

Speaker Change: Honestly trails chatter beauty by pretty wide margin.

Sundar Pichai: Turning to our AI progress this quarter, which continues to enable significant growth opportunities. The elements of the AI stack I've previously mentioned are AI infrastructure, world-class research, including models and tooling, and our products and platforms. Starting with AI infrastructure, our long-term investments in our global network have positioned us well. Google's network is robust and resilient, supported by over 2 million miles of fiber and 33 subsea cables. Complementing this, we offer the industry's widest range of TPUs and GPUs and continue to invest in next-generation capability. Ironwood, our 7th generation TPU, and most powerful to date, is the first designed specifically for an inferencive scale.

Speaker Change: Could you talk about the strategy to get that figure or much higher that you guys are deploying.

Speaker Change: We had the leading cloud solution for companies looking to the new era of AI agents, a big opportunity.

Speaker Change: And then so just curious to hear what you're seeing on the brand advertising side of Youtube and <unk> and into early Q2, our brands holding up relatively well like direct response or are they starting to react to some of these macro jitters that were we're all experiencing any thought.

Speaker Change: Our agent development kit is a new open source framework to simplify the process of building sophisticated AI agents and multi agent systems.

Speaker Change: An agent designer is a local tool to build AI agents and automate tasks and over 100 enterprise applications and systems.

Speaker Change: Thank you very much.

Thanks, Ross I think I touched upon this to Eric's question as well, but Ah you know we are definitely.

Speaker Change: We are putting AI agents in the hands of employees at major global companies like KPMG.

Speaker Change: With Google agents space employees can find and synthesize information from within their organization.

Speaker Change: I think.

Speaker Change: You know there's been a lot of momentum in terms of product features we've been introducing and you know we are definitely seeing.

Speaker Change: With AI agents and take action, but their enterprise applications.

Sundar Pichai: It delivers more than 10x improvement in compute power over a recent high-performance TPU while being nearly twice as power efficient. A strong relationship with NVIDIA continues to be a key advantage for us and our customers. We were the first cloud provider to offer NVIDIA's groundbreaking B200 and GB200 Blackwell GPUs and will be offering their next generation VeraRubin GPUs. Second, this infrastructure powers our world-class research, including our industry-leading model. We released Gemini 2.5 Pro last month, receiving extremely positive feedback from both developers and consumers. 2.5 Pro is state-of-the-art on a wide range of benchmarks and debuted at number one on the chatbot arena by a significant margin.

Speaker Change: Reception, including increased adoption and usage based on those features so I think we are in a good positive cycle. The recent advances on the model frontier by.

Speaker Change: It combines enterprise search conversational AI or chat and access to Gemini and third party agents.

Speaker Change: We also offer pre package agents across customer engagement coating creativity and more that are helping to provide conversational customer experiences accelerate software development and improved decision making.

Speaker Change: By many metrics I think we have the best model out there now and I think I think that's going to drive.

Speaker Change: Increased.

Speaker Change: Our option as well and again I would reiterate you know people are using <unk>.

Speaker Change: Obviously, we have one 5 billion users through AI all of us are interacting with what.

Speaker Change: And of course, Google workspace, it delivers more than 2 billion AI assist monthly, including summarizing Gmail and defining docs.

Speaker Change: With AI in a deep way in a very.

Speaker Change: Lastly, our cyber security products are helping organizations detect investigate and respond to cyber security threats, our expertise coupled with integrated Gemini AI advances detect malware prioritizes threats and speeds up in Michigan workflows.

Speaker Change: And gateway, obviously, we are innovating with AI mode, and you know we have a very exciting roadmap ahead of it.

Speaker Change: With the Gemini App as well so across the board are Super Super excited about what's ahead.

Speaker Change: And on your brand question brand and by the way also direct response had a very solid growth in Q1.

Sundar Pichai: 2.5 Pro achieved big leaps in reasoning, coding, science, and math capabilities, opening up new possibilities for developers and customers. Active users in AI Studio and Gemini API have grown over 200% since the beginning of the year. And last week, we introduced 2.5 Flash, which enables developers to optimize quality and cost. Our latest image and video generation models, Imagine 3 and VO2, are rolling out broadly and are powering incredible creativity.

Speaker Change: This quarter, we were excited to announce our intent to acquire vis a leading cloud security platform that protects all major clouds and cold environments together, we can make it easier and faster for organizations of all types and sizes to protect themselves.

Speaker Change: Brian advertisers really enjoyed cultural moments, we had like a Coachella for example, our March madness.

Speaker Change: We had strong contributions overall from a finance and retail verticals in Q1.

Speaker Change: On the side as well.

Speaker Change: And to end and across all major clubs.

Speaker Change: Operating metrics for Youtube was strong in Q1, what should I am growth remains robust, particularly in key monetization opportunity areas such as shorts in the living room.

Speaker Change: We think this will help spur more multi cloud computing something customers want.

Speaker Change: Next Youtube yesterday marked a historic milestone the 20th anniversary of the first video uploaded to Youtube.

Speaker Change: It's also by the way nice to see the strong position of our creators, who obviously benefit from the brand piece, which gives us a lot of confidence when we look at it more closely and on the Q2 side I think I mentioned, it's too early to really comment on that.

Sundar Pichai: Turning to open models, we launched Gemma 3 last month, delivering state-of-the-art performance for its size. Gemma models have been downloaded more than 140 million times.

Speaker Change: That single 19 second upload the platform has grown into a global phenomenon fundamentally changing how billions of people create chat and experience content.

Sundar Pichai: Lastly, we are developing AI models in new areas where there's enormous opportunity. For example, our new Gemini robotics model.

Speaker Change: Through all this growth subscriptions are now a big part of the business. We continue to diversify subscription options recently, expanding our premium light pilot to the U S, giving users a new way to enjoy most videos on Youtube ad free.

Speaker Change: Thank you. Your next question is from Mark Shmulik from Bernstein. Your line is now open.

Sundar Pichai: And in health, we launched AI CoScientist, a multi-agent AI research system, while AlphaFold has now been used by over 2.5 million researchers.

Mark Shmulik: Great. Thanks for taking my questions.

Speaker Change: TV is the primary device for Youtube viewing in the U S. According to Nielsen Youtube has been number one in streaming watch time in the U S for the last two years and Youtube now has over 1 billion monthly active podcast users.

Mark Shmulik: I appreciate the color on Gemini deployment across kind of the 15 products, what would happen 1 billion users or more.

Sundar Pichai: Third, turning to products and platforms. All 15 of our products with a half a billion users now use Gemini model. Android and Pixel are two examples of how we are putting the best AI in people's hands, making it super easy to use AI for a wide range of tasks, just by using their camera, voice, or taking a screenshot. We are upgrading Google Assistant on mobile devices to Gemini. And later this year, we'll upgrade tablets, cars, and devices that connect to your phone, such as headphones and watch.

Speaker Change: Great to hear more about where youre seeing the most usage and deployment of Gen AI internally at Google, perhaps whether the capabilities are they in a place today in terms of either supplementing or augmenting the workforce.

Speaker Change: Your music and premium reached or 125 million subscribers, including trials globally.

Mark Shmulik: Then just to build on that earlier AI mode type questions I appreciate it.

Speaker Change: And finally, we must now safely serving over a quarter of million paid passenger trips each week, that's up five X from a year ago. This past quarter Braemar opened up paid service in Silicon Valley.

Mark Shmulik: To X longer queries than traditional search, but any color you can share perhaps on how AI mode behavior differs from how consumers are using the Gemini app. Thank you.

Speaker Change: Through our partnership with Uber expanded in Austin and are preparing for a public launch in Atlanta later this summer, we recently announced Washington D C. As a future ride hailing city going live in 2026 long site in Miami.

Mark Shmulik: Yeah.

Mark Shmulik: Look on internally I mean does it has been.

Sundar Pichai: The Pixel 9a launched to very strong reviews, providing the best of Google's AI offerings like Gemini Live, an AI powered camera feature. and Gemini Live camera and screen sharing is now rolling out to all Android devices, including Pixel and Samsung S25.

Mark Shmulik: Extraordinary.

Mark Shmulik: Amount of focus and excitement both because I think.

Mark Shmulik: Via the early use cases have been transformational in nature and I think the total field previously call it isn't long ways to go.

Speaker Change: The aim of continuous progress on two important capabilities for writers airport axis and freeway driving.

Speaker Change: Thanks to all of our employees for their work this quarter. It was a great start to the year in Q2 will be even more exciting with that Philip over to you.

Mark Shmulik: Obviously I had mentioned a few months ago.

Sundar Pichai: Now moving on to key highlights from across Search, Cloud, YouTube, and Waymo.

Mark Shmulik: In terms of how we are using AI for coding we are continuing to make a lot of progress there in terms of.

Sundar Pichai: First, Search. AI is one of the most revolutionary technologies for enabling and expanding our information machine. and for search we see it growing the number and types of questions we can answer. We are already seeing this with AI overviews, which now has more than 1.5 billion users every month. Nearly a year after we launched AI overviews in the U.S., we continue to see that usage growth is increasing as people learn that search is more useful for more of their queries. So we are leaning in heavily here, continuing to roll the feature out in new countries to more users and to more queries.

Philip: Thanks, Sundar and Hello, everyone.

Mark Shmulik: People using coding solutions I think the last time I said the number was like 25% of code that's check them.

Philip: I'll quickly cover performance for the quarter and then frame the rest of my remarks around the progress we are delivering across search and Youtube and partnerships Google.

Mark Shmulik: And whilst people accepting Eric so just the solutions that number is well over 30% now, but more importantly, we have deployed more deeper flows.

Philip: Google services revenues were $77 billion for the quarter up 10% year on year, driven by strong growth in search and Youtube, partially offset by year on year decline in network revenues.

Mark Shmulik: And particularly with the newer models I think you know we are working on early Agentic workflows and and how we can get those coding experience to be much deeper.

Philip: To add some further color to the performance.

Philip: The 10% increase in search and other revenues was led by financial services, primarily due to strength in insurance followed by retail.

Mark Shmulik: We are deploying it across all parts of the company.

Sundar Pichai: Building on the positive feedback for AI overviews, in March, we released AI Mode, an experiment in lab. It expands what AI overviews can do with more advanced reasoning, thinking, and multimodal capabilities to help with questions that need further exploration and comparison. On average, AI mode queries are twice as long as traditional search queries. We're getting really positive feedback from early users about its design, fast response time, and ability to understand complex nuanced questions. We also continue to see significant growth in multi-modal queries. Circle to Search is now available on more than 250 million devices, with usage increasing nearly 40% this quarter.

Mark Shmulik: Our customer service teams are deeply leading the way there.

Philip: Youtube saw similar performance across verticals, it's 10% growth in advertising revenues was driven by direct response, followed by brand.

Mark Shmulik: Both dramatically enhanced our user experience that's with US made much more efficient to do so and we're actually bringing all our learnings and expertise in our solutions through cloud to our other customers, but beyond that all the way from the finance team preparing for this earnings call to everything.

Philip: So let's start with search where we've seen robust growth in revenues all around the world over 2 billion people use search everyday to find information compare products our shop.

Philip: And there are more than five trillion searches on Google annually.

Philip: We've continued our efforts to help more people ask entirely new questions, bringing more opportunities for businesses to connect with consumers.

Mark Shmulik: It's deeply embedded in everything we do but I still see it as early days and it's going to be a lot more to do on on AI mode look I think we are just leaning in on the early positive feedback or be scaled up AI all of us.

Philip: And as we've mentioned before with the launch of AI overviews, the volume of commercial queries has increased.

Philip: Q1 marked our largest expansion to date for AI overviews, both in terms of launching two new users and providing responses for more questions.

Sundar Pichai: and monthly visual searches with Lens have increased by 5 billion since October.

Mark Shmulik: It's been one of our most positive launches and but it's been clear people are wanted to even more of it and so.

Philip: The feature is now available in more than 15 languages across 140 countries.

Sundar Pichai: Moving on to cloud. At Cloud Next we announced major innovations and over 500 companies shared the business results they are achieving by working with We provide leading cost, performance and reliability for AI training and infrastructure. This enables us to deliver the best value for AI leaders, like any scale and contextual AI, as well as global brands like Verizon. And for highly sensitive data and regulatory requirements, Google distributed cloud and our sovereign AI make Gemini available on-premises or in-country. Our Vertex AI platform makes over 200 foundation models available, helping customers like Lowe's integrate AI. We offer industry-leading models, including Gemini 2.5 Pro, 2.5 Flash, Imagine 3, VO2, Chirp, and Lyria, plus open source and third-party models like Llama 4 and Anthrop.

Philip: Freya overviews overall, we continue to see monetization at approximately the same rate, which gives us a strong base on which we can innovate even more.

Mark Shmulik: You know what they are bringing the our state of the art Gemini models right into search and and.

Mark Shmulik: I mentioned.

Philip: Turning to visual queries on the last earnings call I mentioned the success, we're seeing with lens, where shoppers to use their camera or images to quickly find information in ways. They couldnt before.

Mark Shmulik: People typing in longer <unk>, there's a lot more complex nuanced questions people are following through more people are appreciating.

Philip: In Q1, the number of people shopping on land scrubbed over 10% and the majority of lens cores are incremental.

Mark Shmulik: Clean design, the fast response time, and the fact that they can kind of be much more open ended can undertake more complicated tasks product comparisons for example.

Sundar Pichai: Sundar mentioned the significant growth. We're also seeing with circle to search as multi modality continues to drive <unk> across search.

Mark Shmulik: <unk> has been a positive one exploring how to planning a trip. So those are the kinds of early feedback we are seeing.

Sundar Pichai: Moving to ACH more businesses big and small are adopting AI powered campaigns and the deployment of AI across our ads business is driving results for our customers and for our business.

And I think we're obviously really focused on improving the product across all of AI Modi I all of us under Gemini App and we are seeing foster user traction as well.

Sundar Pichai: Throughout 2024, we launched several features that leverage llm's to enhance advertiser value and we're seeing this work pay off the combination of these launches now allows us to match ads to more relevant search cores and this helps advertisers reach customers in searches where we would not previously have shown their ads.

Sundar Pichai: We are the leading cloud solution for companies looking to the new era of AI agents, a big opportunity. Our Agent Development Kit is a new open source framework to simplify the process of building sophisticated AI agents and multi-agent systems. An agent designer is a low-code tool to build AI agents and automate tasks in over 100 enterprise applications and systems. We are putting AI agents in the hands of employees at major global companies like KPMG. With Google Agent Space, employees can find and synthesize information from within their organization. Converse with AI agents and take action with their enterprise apps.

Mark Mahaney: Your next question is from Mark Mahaney from Evercore. Your line is now open.

Sundar Pichai: Focusing on our customers, we continue to solve advertisers' pinpoints and find opportunities to help them create distribute and measure more performance ads infusing AI at every step of the marketing process on.

Speaker Change: Okay. Thanks, one for not and one for Sundar.

Speaker Change: Getting back to a question I think that Doug was asking earlier on you just put up record high or multi year record high margins for both Google services and for Google Cloud you talked bill about depreciation expenses accelerating rapidly throughout the year because of all the investments you've you've already.

Sundar Pichai: On audience insights, we released new asset audience recommendations, which tell businesses the themes that resonate most with that top audiences.

Sundar Pichai: Creative advertisers can now generate a broad a variety of lifestyle imagery customized to their business to better engage their customers and use them across P. Max demand Gen display and App campaigns.

Speaker Change: When people about.

Speaker Change: Back in the September quarter, you seem relatively confident that you had enough levers to kind of offset kind of rising infrastructure costs is that still your six months later or is that still your view that you've got enough levers that even with the rising infrastructure costs. You can there's enough in there to kind of counterbalance that and then just briefly on weibo.

Sundar Pichai: It combines enterprise search, conversational AI or chat, and access to Gemini and third party agents. We also offer prepackaged agents across customer engagement, coding, creativity, and more that are helping to provide conversational customer experiences, accelerate software development, and improve decision making.

Additionally, N P. Max advertisers can automatically source images from their landing pages and crop them, increasing the variety of their assets.

Sundar Pichai: Our media buying advertisers continue to see how AI powered campaign to help them find new customers and demand Gen advertisers can more precisely manage AD placements across Youtube Gmail discover and Google display network globally, and understand which assets work best at the channel level.

Speaker Change: That continues to rise aggressively the numbers Sundar the long term.

Speaker Change: The business model for Weibo is there a reason to make a decision on that soon or do you have you already made the decision of whether this is a long term licensing model or you really want to run this a standalone ridesharing delivery autonomous vehicle business. Thank you very much.

Sundar Pichai: and, of course, Google Workspace. It delivers more than 2 billion AI assets monthly, including summarizing Gmail and refining Docs. Lastly, our cybersecurity products are helping organizations detect, investigate, and respond to cybersecurity threats. Our expertise, coupled with integrated Gemini AI advances, detects malware, prioritizes threats, and speeds up investigative work.

Sundar Pichai: Dozens of AI part improvements launched in 2024 businesses using demand Gen nausea, and averaged 26% year on year increase in conversions per dollar spent for goes like purchases and dates.

Speaker Change: Thanks, So on your first question on profitability and what levers do we have and do we still have levers to pull first I think every organization can always special little further.

Sundar Pichai: And when using demand gen with product feet on average they see more than double the conversion per dollar spend year over year.

Speaker Change: Don't view, our productivity goals or efficiency is an episodic I'm kind of project based effort, but rather a continuous effort that when you get to Mr. In place.

Sundar Pichai: As an example, royal Kennan combined demand Gen and Pemex campaigns to find more customers for its cat and dog food products.

Sundar Pichai: This quarter, we were excited to announce our intent to acquire Viz, a leading cloud security platform that protects all major clouds and code environments. Together, we can make it easier and faster for organizations of all types and sizes to protect themselves end-to-end and across all major clouds. We think this will help spur more multi-cloud computing, something customers want.

Speaker Change: Place you push a little further.

Sundar Pichai: Integration resulted in a 2.7 times higher conversion rate of 70% lower cost per acquisition for purchases.

Speaker Change: Having said that we do have significant investments, we're making across the organization and we have been making them for the past several quarters and we've been able to do it because we were able to find efficiency to fund those investments across the organization and those are for products and services around drive long term growth for the company.

Sundar Pichai: And increase the value per user by 8%.

Sundar Pichai: Turning to Youtube, where we saw strong growth in revenues across ads and subscriptions.

Sundar Pichai: This week, we are celebrating Youtube 20th anniversary, we're proud of its leadership as a streaming destination where people come to watch everything they love from life sports and greater produced content to shorts and podcast creators are what drives viewership and on average they upload 20 million videos a day to Youtube.

Sundar Pichai: Next, YouTube.

Sundar Pichai: Yesterday marked a historic milestone, the 20th anniversary of the first video uploaded to YouTube. From that single 19-second upload, the platform has grown into a global phenomenon, fundamentally changing how billions of people create, share, and experience content. Through all this growth, subscriptions are now a big part of the business. We continue to diversify subscription options, recently expanding our Premium Lite pilot to the U.S., giving users a new way to enjoy most videos on YouTube. TV is the primary device for YouTube viewing in the U.S. According to Nielsen, YouTube has been number one in streaming watch time in the U.S.

Speaker Change: So well work and trying to offset as much of the headwind associated with the increase in infrastructure costs.

Speaker Change: Will become more difficult as I said, the depreciation will accelerate we had about a 31% year over year growth in depreciation this quarter and it will be higher as we go throughout the year. So.

Our biggest creators generate a level of fandom and viewer engagement around large cultural moments on Youtube that brands can't find anywhere else during March madness brands aligned not only with clips and highlights from the game, but also with the creators would drive basketball culture like gesture and the ringers Jay came in in.

Speaker Change: Think about that kind of as a headwind that we have to manage it again, but were continuing with pushing across the organization leveraging sundar mentioned the use of AI.

Speaker Change: And as an AI first Google across several of our functions to help us manage a larger scope of work using our AI agents and AI tools that they're mentioned, we did deleverage it in preparation for the earnings call and we're leveraging across several functions.

Sundar Pichai: In Q1, the growth of our reservation based ads business more than doubled year over year.

Sundar Pichai: for the last two years, and YouTube now has over one billion monthly active podcast. YouTube Music and Premium reached over 125 million subscribers, including Trials Global.

Sundar Pichai: Brands and creators continue to use the opportunity set collaborations and partnerships offer.

Sundar Pichai: To you to work with Zach King the King of short magical videos with over 42 million follow us to take over his channel.

Speaker Change: So there are opportunities, but there are also great opportunities for investment and we want to make sure that we make room for <unk> to make these investments to drive long term growth and ensure we have a very resilient long term growth profile for the company.

Sundar Pichai: And finally, Waymo is now safely serving over a quarter of a million paid passenger trips each week. That's up 5x from a year ago. This past quarter, Waymo opened up paid service in Silicon Valley. Through our partnership with Uber, we expanded in Austin and are preparing for our public launch in Atlanta later this summer. We recently announced Washington, DC as a future ride-hailing city going live in 2026 alongside Miami. Waymo continues progressing on two important capabilities for riders, airport access and freeway driving. Thanks to all of our employees for their work this quarter. It was a great start to the year and Q2 will be even more exciting.

Sundar Pichai: Creator takeover and accompanying crater add lifted to euro brand awareness by 25% compared to a control group of 9% compared to the Toyota brand at.

Mark Mahaney: And Mark Thanks, I think I think this is probably the first question I've got on an earnings call on where he most of it. Thank you and I think it's a sign of its progress.

Looking at shorts engaged views grew by over 20% in the first quarter. We continued to be pleased with the progress we're making globally in shorts monetization relative to in stream viewing and are particularly encouraged by the trend in the U S.

Mark Mahaney: Look the thing that excites me is I think we've been laser focused and will continue to be on building the world's best driver.

Sundar Pichai: As always I'll wrap up with the strong momentum, we're seeing in partnerships, where our customers increasingly recognize the strength and breadth of what Google has to offer.

Mark Mahaney: And I think I think I think doing that well read.

Mark Mahaney: Really gives you a variety of.

Sundar Pichai: For instance, roadblocks as partner in Google AD manager to bring immersive ads to gamers Gen Z gamers or roadblocks biggest users and thanks to our partnership advertisers will be able to reach this audience with ads that blend seamlessly into the gaming experience.

Mark Mahaney: Optionality and business models across geographies et cetera.

Philipp Schindler: With that, Philipp, over to you. Thanks, Sundar, and hello everyone. I'll quickly cover performance for the quarter and then frame the rest of my remarks around the progress we're delivering across search, ads, YouTube, and partnerships.

Mark Mahaney: It will also require a successful ecosystem of partners and.

Mark Mahaney: We can possibly do it all ourselves and so I'm excited about the progress.

Mark Mahaney: The teams have made through a variety of partnerships obviously.

Sundar Pichai: We also launched a Youtube shorts effect to help people release iconic roadblocks heads and inspire fans to create content at scale.

Philipp Schindler: Google services revenues were $77 billion for the quarter, up 10% year-on-year, driven by strong growth in search and YouTube, partially offset by year-on-year decline in network revenue. To add some further color to the performance. The 10% increase in search and other revenues was led by financial services, primarily due to strength in insurance, followed by retail. YouTube saw a similar performance across verticals. Its 10% growth in advertising revenues was driven by direct response, followed by brand So let's start with search, where we've seen robust growth and revenues. All around the world, over 2 billion people use search every day to find information, compare products or shop.

Mark Mahaney: A highlight of it is our partnership with Uber. We are very pleased with what we are already seeing in Austin in terms of what either satisfaction.

Sundar Pichai: In closing I'd like to thank googlers everywhere for their contributions and commitment to our success and to our customers and partners for their continued trust in us.

Mark Mahaney: We look forward offering the first paid rights in Atlanta, we are <unk> later this year.

Sundar Pichai: Over to you.

Speaker Change: Thank you Philip My comments will focus on year over year comparisons for the first corner unless I state otherwise.

Mark Mahaney: But we're also building up a network of partners for example for maintaining fleets of vehicles and doing all the operations related to that.

Speaker Change: I will start with results at the alphabet level and will then cover our segment results.

Mark Mahaney: With the recently announced partnership with <unk> in Phoenix, and Miami, obviously partnerships with Oems.

Speaker Change: And with some commentary on our outlook for the second quarter and 2025.

Mark Mahaney: There are future optionality around our personal ownership as well so we are widely exploring.

Speaker Change: We had another strong quarter in Q1 consolidated revenues of $90.2 billion increased by 12% or 14% in constant currency.

Mark Mahaney: And but at the same time.

Philipp Schindler: And there are more than 5 trillion searches on Google annually. We've continued our efforts to help more people ask entirely new questions, bringing more opportunities for businesses to connect with consumers. And as we've mentioned before, with the launch of AI overviews, the volume of commercial queries has increased. Q1 marked our largest expansion to date for AI overviews, both in terms of launching to new users and providing responses for more questions. The feature is now available in more than 15 languages across 140 countries. For AI overviews, overall, we continue to see monetization at approximately the same rate, which gives us a strong base on which we can innovate even more.

Clearly staying focused on making progress both in terms of safety the driver experience and our progress on the business model and operationally scaling it up.

Speaker Change: Search and Youtube advertising subscription platforms and devices and Google cloud each had double digit revenue growth this quarter, reflecting strong momentum across the business.

Speaker Change: Okay. Thank you very much.

Speaker Change: Total cost of revenue was $36 $4 billion up 8%.

Mark Mahaney: Yeah.

Mark Mahaney: Thank you.

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

Speaker Change: <unk> was $13 7 billion up 6%.

Speaker Change: We continue to see a revenue mix shift with Google search growth at double digit levels, while network revenues, which have much higher Tac rate declined.

Ken Goralski: Thank you two if I may please first one on <unk>.

Ken Goralski: AI powered search.

Speaker Change: You have a number of AI powered search interfaces.

Other cost of revenue was $22 $6 billion up 9% with the increase primarily driven by content acquisition costs largely for Youtube, followed by depreciation and other technical infrastructure operations costs.

Ken Goralski: Including three most prominently AI overviews AI mode in Gemini.

Speaker Change: In the future should we think of these as distinct experiences.

Philipp Schindler: Turning to visual queries. On the last earnings call, I mentioned the success we're seeing with Lens, where shoppers use their camera or images to quickly find information in ways they couldn't before. In Q1, the number of people shopping on Lens grew by over 10%, and the majority of Lens queries are incremental. Sundar mentioned the significant growth we're also seeing with Circle2Search as multimodality continues to drive queries across search.

Speaker Change: Well that will be long lasting or more experimental now and will in Google will eventually focus on one approach going forward.

Speaker Change: Total operating expenses increased 9% to $23 $3 billion.

Speaker Change: And the second one is more on.

Speaker Change: R&D investments increased by 14%, primarily driven by increases in compensation and depreciation expenses.

Speaker Change: On the financial side, you continue to experience very healthy gross margin expand expansion.

Speaker Change: Sales and marketing expenses decreased 4%, primarily reflecting a decline in compensation expenses.

Speaker Change: We see the Tac for but.

Philipp Schindler: Moving to ads. More businesses, big and small, are adopting AI-powered campaigns, and the deployment of AI across our ads business is driving results for our customers and for our business. Throughout 2024, we launched several features that leverage LLMs to enhance advertiser value. And we're seeing this work pay off. The combination of these launches now allows us to match ads to more relevant search queries. And this helps advertisers reach customers in searches where we would not previously have shown their ads. Focusing on our customers, we continue to solve advertisers' pain points and find opportunities to help them create, distribute, and measure more performant ads, infusing AI at every step of the marketing process.

Speaker Change: You also talked about the offsetting depreciation expense could you talk about beyond those two buckets, where you're seeing that be the real savings on the Cogs line and driving that gross margin expansion and maybe even how are you.

Speaker Change: G&A expenses increased by 17%.

Speaker Change: Reflecting the impact of charges for legal and other matters.

Speaker Change: Operating income increased 20% this quarter to $31 billion and operating margin increased to 33, 9% representing two points three points of margin expansion.

Speaker Change: How we should be thinking about that going forward. Thank you.

Okay now.

Speaker Change: On AI powered search and how do we see our consumer experiences look I do think search and Gemini obviously it will be.

Speaker Change: Operating margin benefited from healthy revenue growth, a moderated pace of compensation growth and a favorable mix shift towards lower tech advertising revenues.

Speaker Change: Two distinct efforts right I think there are obviously some areas of overlap, but there also.

Speaker Change: You know like exposed very very different use cases, and so for example in Gemini V. C people at creatively coding and going much deeper on according workflow as an example, so I think both will be around within search.

Speaker Change: Partially offset by year on year increase in depreciation expenses of just over $1 billion.

Philipp Schindler: On Audience Insights, we released new asset audience recommendations which tell businesses the themes that resonate most with their top audience. On Kratos, advertisers can now generate a broader variety of lifestyle imagery customized to their business to better engage their customers and use them across PMax, demand gen, display, and app campaigns. Additionally, in PMax, advertisers can automatically source images from their landing pages and crop them, increasing the variety of their assets. On media buying, advertisers continue to see how AI-powered campaigns help them find new customers. and DemandGen. Advertisers can more precisely manage ad placements across YouTube, Gmail, Discover and Google Display Network globally and understand which assets work best at the channel level.

Speaker Change: Other income and expenses was $11.2 billion, primarily due to unrealized gain on our non marketable equity securities related to our investment in a private company, which we noted in our 10-K as a subsequent event.

Speaker Change: Think of AI, all of us scaling up and working for our entire user base, but an AI mode is the tip of the tree for us pushing forward on our AI forward experience.

Speaker Change: Net income increased 46% to $34 $5 billion and earnings per share increased 49% to $2.81.

Speaker Change: There will be things, which we discovered there, which will make which will make sense in the context of AI all of us. So I think I think it will flow through to our user base.

Speaker Change: We delivered free cash flow of $19 billion in the first quarter and $74 $9 billion for the trailing 12 months, we ended the quarter with $95 billion in cash and marketable securities.

Speaker Change: But you almost want to think of what are the most advanced 1 million people using search for the most advanced 10 million people and then how to a billion and a half people use search for.

Speaker Change: And we want to innovate and so I think this allows us to do that but the truth not through all of this is.

Speaker Change: Turning to segment results, Google services revenues increased 10% to $77 $3 billion, reflecting strength in Google search and Youtube advertising or subscription.

Philipp Schindler: Thanks to dozens of AI-powered improvements launched in 2024, businesses using DemandGen now see an average 26% year-on-year increase in conversions per dollar spent for goals like purchases and leads. And when using DemandGen with product feed, on average, they see more than double the conversion per dollar spent year over year. As an example, Royal Cannon combined DemandGen and PMax campaigns to find more customers for its cat and dog food products. The integration resulted in a 2.7 times higher conversion rate, a 70% lower cost per acquisition for purchases, and increased the value per user by 8%.

Speaker Change: User feedback user satisfaction user experience and so that will determine where this all works out in the future.

Speaker Change: Search and other advertising revenues increased by 10% to $50 7 billion.

Speaker Change: And to your question on gross margin a couple of trends to highlight there and I've mentioned this in the prepared remarks, you've seen improvement in tech that's really driven.

Speaker Change: The robust performance of search was once again broad based across verticals led by financial services due primarily to strength in insurance followed by retail.

Speaker Change: Driven by the change in revenue mix with a continued search gross and then network revenue declines network revenue has a much higher tac rate so.

Speaker Change: Youtube advertising revenues increased 10% to $8 $9 billion driven by direct response advertising followed by Brent.

Speaker Change: So that mix is helping us from a gross margin perspective, so think about that as well now we do have depreciation.

Speaker Change: Network advertising of $7 $3 billion were down 2%.

Philipp Schindler: Turning to YouTube, where we saw strong growth and revenues across ads and subscriptions. This week, we're celebrating YouTube's 20th anniversary. We're proud of its leadership as a streaming destination where people come to watch everything they love, from live sports and creator-produced content to shorts and podcasts. Creators are what drives viewership, and on average, they upload 20 million videos a day to YouTube. Our biggest creators generate a level of fandom and viewer engagement around large cultural moments on YouTube that brands can't find anywhere else. During March Madness, brands align not only with clips and highlights from the game, but also with the creators who drive basketball culture, like Jesser and the Ringer's J.

Speaker Change: Subscription platforms and device revenues increased 19% to $10 $4 billion, primarily reflecting growth in subscription revenues.

Speaker Change: For technical infrastructure hits in two places primarily in two places in the income statement. One is in other cost of sales and the rest is in R&D.

Speaker Change: So it is in that line item that's impacting cost of sales now we've had some efficiencies there and I did mention the improvement in our.

Speaker Change: This growth was primarily driven by Youtube subscription offerings, followed by Google one with growth in the number of subscribers being the biggest driver of revenue growth.

Speaker Change: Overall cost of.

Speaker Change: Google services operating income increased 17% to $32 $7 billion and operating margin increased from 39, 6% to 42.3%.

Speaker Change: Head count growth and compensation kind of moderating those growth so that helps us as well and more than offset the depreciation increases in Q1, but as I've mentioned this number will be higher in the coming quarters recall, we have we said approximately $75 billion.

Speaker Change: Turning to the Google Cloud segment, which continued to deliver very strong results this quarter.

Philipp Schindler: Kyle Mann. In Q1, the growth of our reservation-based ads business more than doubled year over year. Brands and creators continue to use the opportunities that collaborations and partnerships offer. Toyota worked with Zach King, the king of short magical videos, with over 42 million followers, to take over his channel. The creator takeover and accompanying creator ad lifted Toyota's brand awareness by 25% compared to a control group and 9% compared to the Toyota brand ad. Looking at shorts, engaged views grew by over 20% in the first quarter. We continue to be pleased with the progress we're making globally in shorts monetization relative to in-stream viewing and are particularly encouraged by the trend in the US.

Speaker Change: Revenue increased by 28% to $12 $3 billion in the first quarter, reflecting growth in <unk> across core and AI products at a rate that was much higher than cloud overall revenue growth rate.

Speaker Change: In Capex, which is up from 55 or just over 50 billion last year. So there is there is expected to be quite a significant increase in depreciation.

Speaker Change: Growth in Google Workspace was primarily driven by an increase in average revenue per seat.

Speaker Change: Thank you and our last question comes from Ron Josey from Citi. Your line is now open.

Speaker Change: They'll go cloud operating income increased to $2 $2 billion and operating margin increased from nine 4% to 17, 8%.

Ron Josey: Alright, Thanks for taking the question Philip I wanted to touch a little bit more on your comments around direct response, and Youtube I think that improving and been a driver over the past couple of quarters, but love to hear more just about what's driving that is that the demand gen and integration with peanuts or our users perhaps more involved on direct response now that shorts usage are driving would love your thoughts there.

Speaker Change: As we scale our fleet, we continue to focus on driving improvements in productivity.

Speaker Change: <unk> C and utilization to offset the growth in expenses, particularly from higher depreciation.

Speaker Change: Mr. Other bets for the first quarter revenues were $450 million in operating loss was $1 2 billion.

Philipp Schindler: As always, I'll wrap up with the strong momentum we're seeing in partnerships, where customers increasingly recognize the strength and breadth of what Google has to offer. For instance, Roblox is partnering with Google Ad Manager to bring immersive ads to gamers. Gen Z gamers are Roblox's biggest users, and thanks to our partnership, advertisers will be able to reach this audience with ads that blend seamlessly into the gaming experience. We also launched a YouTube Shorts effect to help people release iconic Roblox heads and inspire fans to create content at scale.

Speaker Change: Thank you.

Yes, I think there's a lot of different factors.

Speaker Change: Mostly we continue to help our customers are really using our AI powered tools you mentioned a few of them to drive performance. So that's a very big one as I mentioned before we're also happy with the progress we're seeing on shorts and closing.

Speaker Change: The year on year decline in revenue and increase in operating loss, primarily reflects the milestone payment received in the first quarter of 'twenty 'twenty four for one of our other bets.

Speaker Change: With respect to Capex, our reported Capex in the first quarter was $17 $2 billion, primarily reflect investments in our technical infrastructure with the largest component being investment in servers.

Speaker Change: A monetization gap here.

To the overall business, which is actually a really nice to see especially in the U S. So we're very happy with that.

Speaker Change: Yes.

Speaker Change: You know I'll just chime in to say Youtube just celebrated its 20th birthday and.

Speaker Change: I'll buy data centers to support the growth of our business across Google services, Google Cloud and Google Deep mind.

Philipp Schindler: In closing, I'd like to thank Googlers everywhere for their contributions and commitment to our success and to our customers and partners for their continued trust.

Speaker Change: We now have more than 20 20 billion videos on Youtube and we get 20 million videos uploaded every day. So I think it's a tremendous platform and thanks to all of the creators and users who have supported us over the years.

Speaker Change: In Q1, we returned value to shareholders in the form of 15 point and $1 billion in share repurchases and $2 $4 billion in dividend payments.

Anat Ashkenazi: Anat, over to you. Thank you, Philipp. My comments will focus on your VR comparisons for the first quarter, unless they state otherwise. I will start with results at the alphabet level and will then cover our segment results.

Speaker Change: Great. Thank you.

Speaker Change: As we announced today our board of directors declared a 5% increase in our quarterly dividend and also approved a new $70 billion share repurchase authorization.

Anat Ashkenazi: I'll end with some commentary on our outlook for the second quarter in 2025. We had another strong quarter in Q1, consolidated revenues of $90.2 billion, increased by 12%, or 14% in constant currency. Search and YouTube advertising, subscription platforms and devices, and Google Cloud each had double digit revenue growth this quarter, reflecting strong momentum across the business. Total cost of revenue was $36.4 billion, up 8%. Tech was $13.7 billion, up 6%. We continue to see a revenue mix shift with Google search growth at double-digit levels, while network revenues, which have much higher tech rate, declined. Other costs of revenue was $22.6 billion, up 9%, with the increase primarily driven by content acquisition costs, largely for YouTube, followed by depreciation and other technical infrastructure operations costs.

Speaker Change: Thank you and that concludes our question and answer session for today I would like to turn the conference back over to Jim Freeland for any further remarks.

Speaker Change: Turning to our outlook I would like to provide some commentary on several factors that will impact our business performance in the second quarter and the remainder of 2025.

Speaker Change: Thanks, everyone for joining us today, we look forward to speaking with you again on our second quarter 2025 call. Thank you and have a good evening.

First in terms of revenue I'll highlight a couple of items that we mentioned last quarter that will have an impact on second quarter and 2025 revenue.

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

Speaker Change: First in Google services advertising revenue in 2025 will be impacted by lapping the strength, we experienced in the financial services vertical throughout 2024.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Second in cloud or in a tight demand supply environment and given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates, depending on capacity deployment each quarter we.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: We expect relatively higher capacity deployment towards the end of 2025.

Speaker Change: Okay.

Speaker Change: Moving to investments starting with our expectation for Capex for the full year 2025.

Speaker Change: Thank you.

Speaker Change: We still expect to invest approximately $75 billion in Capex this year.

Speaker Change: Okay.

Anat Ashkenazi: Total operating expenses increased 9% to $23.3 billion. R&D investments increased by 14%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses decreased 4%, primarily reflecting a decline in compensation expenses. GNA expenses increased by 17% reflecting the impact of charges for legal and other matters. Operating income increased 20% this quarter to $31 billion, and operating margin increased to 33.9%, representing 2.3 points of margin expansion. Operating margin benefited from healthy revenue growth, a moderated pace of compensation growth, and a favorable mixed shift towards lower tech advertising revenues. Partially offset by a year-on-year increase in depreciation expenses of just over $1 billion.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: The expected Capex investment level may fluctuate from quarter to quarter due to the impact of changes in the timing of deliveries and construction schedules.

Speaker Change: Okay.

Speaker Change: In terms of expenses first as I mentioned on our previous earnings call. The significant increase in our investments in Capex over the past few years, we will continue to put pressure on the P&L, primarily in the form of higher depreciation in.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: In the first quarter, we saw 31% year on year growth in depreciation from the increase in technical infrastructure assets placed in service.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Given the increase in Capex investments over the past few years, we expect the growth rate in depreciation to accelerate throughout 2025.

Speaker Change: Second as we've previously said, we expect some head count growth in 2025 in key investment area.

Speaker Change: We disclosed previously due to a shift in timing of our annual employee stock based compensation awards beginning in 2023.

Speaker Change: Our first quarter stock based comp expenses is relatively lower compared to the remaining quarters of the year in.

Anat Ashkenazi: Other income and expenses was $11.2 billion, primarily due to unrealized gain on our non-marketable equity securities related to our investment in a private company, which we know that our $10K is a subsequent event. Net income increased 46% to $34.5 billion and earnings per share increased 49% to $2.81. We delivered free cash flow of $19 billion in the first quarter and $74.9 billion for the trail in 12 months. We ended the quarter with $95 billion in cash and marketable securities. Turning to segment results, Google services revenues increased 10% to $77.3 billion, reflecting strength in Google Search and YouTube advertising as subscription.

Speaker Change: In conclusion as you heard from Sundar and fill it we're pleased with the progress we're making across the organization the results for the quarter and the opportunities ahead.

Speaker Change: Our success as a company is grounded in our experience driving advancements in deep computer science that enables us to create innovative new products and services for users businesses and partners around the world.

Speaker Change: We have a strong track record of incubating and then building these offerings into new profitable businesses for alphabet.

As we announced last quarter Youtube and cloud exited 2024, and a combined annual run rate of $110 billion.

Speaker Change: And as you heard from sooner earlier whaler is continuing to progress and building on its impressive technological achievements to scale rapidly and develop a sustainable business model. Thank.

Anat Ashkenazi: Google Search and other advertising revenues increased by 10% to $50.7 billion. The robust performance of Search was once again broad-based across verticals, led by financial services primarily to strengthen insurance, followed by retail. YouTube advertising revenues increased 10% to $8.9 billion, driven by direct response advertising, followed by brand. Network advertising of $7.3 billion were down 2%. Subscription platforms and device revenues increased 19% to $10.4 billion, primarily reflecting growth in subscription revenues. This growth was primarily driven by YouTube subscription offerings, followed by Google One, with growth and the number of subscribers being the biggest driver of revenue growth.

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

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.

Speaker Change: Prevent any background noise, we ask could you. Please mute your line. Once your question has been stated.

Speaker Change: And our first question comes from Brian Nowak from Morgan Stanley. Your line is now open.

Brian Nowak: Great. Thanks for taking my questions I have two the first one on sort of the macro advertising backdrop, maybe I'm not I know April 24th and you called out some factors as you kind of thinking about the second quarter any other factors youre seeing in advertising verticals or regions or categories that could be a showing any signs of weakness quarter dates.

Brian Nowak: Should think through any other changes from typical seasonality into Q25 versus prior quarters.

Anat Ashkenazi: Google services operating income increased 17% to $32.7 billion, and operating margin increased from 39.6% to 42.3%.

Speaker Change: I'm Philip I think I heard you mentioned that the volume of commercial queries has increased maybe can you just walk us through which of the products are driving that increase in commercial queries and as you sort of think about the pipeline of search products are there any others that you're particularly excited about the kind of continue to drive further commercial query growth throughout 'twenty five.

Anat Ashkenazi: Turning to the Google Cloud segment, which continued to deliver very strong results this quarter. Revenue increased by 28% to $12.3 billion in the first quarter, reflecting growth in GCP across core and AI products at a rate that was much higher than cloud's overall revenue growth rate. Growth in Google Workspace was primarily driven by an increase in average revenue per seat. Google Cloud Operating Income increased to $2.2 billion, and operating margin increased from 9.4% to 17.8%. As we scale our fleet, we continue to focus on driving improvements in productivity, efficiency, and utilization to offset the growth in expenses, particularly from higher depreciation.

Thanks.

Speaker Change: So let me take the first one as well we saw broad based strength across AD verticals in Q1.

Speaker Change: We saw it gives you a bit of vertical color here a surge was led again by finance due primarily primarily to ongoing strength in the insurance retail health care and travel works you also sizable contributors here to growth.

Speaker Change: With regard to Q2, we were only a few weeks and so it's really too early to comment I mean, we're obviously not immune to the macro environment, but we wouldn't want to speculate about potential impacts beyond noting that the changes to the de minimis exemption will obviously cause a slight headwind to our ads business in 2025, primarily from APAC based.

Anat Ashkenazi: As to our other bets, for the first quarter, revenues were $450 million, and operating loss was $1.2 billion. The year-on-year decline in revenue and increase in operating loss primarily reflect the milestone payment received in the first quarter of 2024 for one of our other bets. With respect to CapEx, our reported CapEx in the first quarter was $17.2 billion, primarily reflecting investment in our technical infrastructure, with the largest component being investment in servers, followed by data centers to support the growth of our business across Google Services, Google Cloud, and Google DeepMind.

Speaker Change: Our retailers and maybe zoom out I would say we have a lot of experience in managing through uncertain times, and we focus on helping our customers.

Speaker Change: By providing deep insights into change in consumer behavior that is relevant to their business are examples of our auction dynamics core trend insights on topics like replacement purchases and so on.

Speaker Change: So we have a lot of experience in this area.

Speaker Change: On the commercial core side.

Speaker Change: Look a over here he was continued to drive higher satisfaction.

Anat Ashkenazi: In Q1, we returned value to shareholders in the form of $15.1 billion in share purchases and $2.4 billion in dividend payments. As we announced today, our Board of Directors declared a 5% increase in our quarterly dividend and also approved a new $70 billion charity purchase authorization.

Speaker Change: <unk> users and as I noticed Q1 was really our largest expansion to date for you all reviews. Both in terms of launching two new users and providing responses for more questions. Since that's really the core already off the answer a overview sits at the center.

Speaker Change: Your question here and when it comes to other products I don't want to speculate on this but we're happy with what we're seeing here on a overviews and.

Anat Ashkenazi: Turning to our outlook, I would like to provide some commentary on several factors that will impact our business performance in the second quarter and the remainder of 2025. First, in terms of revenue, I'll highlight a couple of items that we mentioned last quarter that will have an impact on second quarter and 2025 revenue. First, and Google Services Advertising Revenue in 2025 will be impacted by lapping the strength we experience in the financial service vertical throughout 2024. Second in cloud, we're in a tight demand-supply environment. And given that revenues are correlated with the timing of deployment of new capacity, we could see variability in cloud revenue growth rates depending on capacity deployment each quarter.

Speaker Change: I'm confident.

Speaker Change: And we can expand this to more products over time.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question is from Doug <unk> from.

Speaker Change: J P. Morgan your line is now open.

Doug: Great. Thanks for taking my questions.

Speaker Change: So maybe just to go back to <unk>.

Doug: Overviews for a moment.

Doug: Tell us how we should think about the one 5 billion.

Doug: I overviews users just in terms of breadth of rollout and I know youre, saying monetization at approximately the same rate.

Doug: But what does that mean in terms of click through rates and conversion and then or not.

Anat Ashkenazi: We expect relatively higher capacity deployment towards the end of 2025. Moving to investments, starting with our expectation for CapEx for the full year 2025, we still expect to invest approximately $75 billion in CapEx this year. The expected CapEx investment level may fluctuate from quarter to quarter due to the impact of changes in the timing of deliveries and construction schedules. In terms of expenses, first, as I mentioned in our previous earnings call, the significant increase in our investments in CapEx over the past few years will continue to put pressure on the P&L, primarily in the form of higher depreciation.

Doug: Curious if theres been any changes to google's approach to Durably reengineering the cost base since you've joined and if macro weakens and you see more of a slowdown would you expect.

Doug: To find additional opportunities to cut back more on costs. Thank you, yes look on the ads.

Doug: And AI overuse last late last year actually we launched them with India overviews on mobile in the U S and this builds on our previous rollout of ads Buffon below. So this was a change that we have but as I talked about it before for <unk> overall, we see the monetization at approximately the same rate, which gives us a strong base on which we can innovate.

Doug: Even more so I'm very happy with US I don't think this is the moment to go into the details of click through rates and conversion and so on but overall, we're happy with what we're seeing.

Anat Ashkenazi: In the first quarter, we saw 31% year-on-year growth in depreciation from the increase in technical infrastructure assets placed in service. Given the increase in CapEx investments over the past few years, we expect the growth rate and depreciation to accelerate throughout 2025. Second, as we've previously said, we expect some headcount growth in 2025 in key investment area. As we've disclosed previously, due to a shift in the timing of our annual employee stock-based compensation award beginning in 2023, our first quarter stock-based comp expenses is relatively lower compared to the remaining quarters of the year.

Doug: And to your question on our approach to productivity and efficiency. It hasn't really changed I've mentioned my approach and our approach as a company on at the end of 2024.

Doug: And we're still focused on driving efficiency and productivity throughout the organization both in our operating expenses and in our Capex I've mentioned some of these on my during my prepared remarks.

Doug: But certainly this helps us as we think about the investments we need to make in innovation to drive long term sustainable growth profile for the company, we're able to repurpose. Some of these efficiencies into these investments as well is as you think about the increase in Capex, we've seen over the past several years and what we're investing this year.

Anat Ashkenazi: In conclusion, as you heard from Sundar and Philipp, we're pleased with the progress we're making across the organization, the results for the quarter, and the opportunities ahead. Our success as a company is grounded in our experience driving advancements in deep computer science that enables us to create innovative new products and services for users, businesses, and partners around the world. We have a strong track record of incubating and then building these offerings into new profitable businesses for Alphabet. As we announced last quarter, YouTube and cloud exited 2024 at a combined annual run rate of $110 billion.

Doug: This will put additional pressure on the income statement in the form of depreciation so we're working hard to try and offset some.

Doug: Some of these headwinds as well as within the Capex investments themselves.

Doug: $75 billion, we're looking at how do we make sure every dollar is used efficiently we have a highly rigorous process to determine the demand behind it and then the allocation of that the computer associate with our technical infrastructure investments, ensuring that we're utilizing that appropriately and we're highly efficient with everything we're doing.

Anat Ashkenazi: And as you heard from Sundar earlier, Waymo is continuing to progress in building on its impressive technological achievements to scale rapidly and develop a sustainable business model.

Doug: You've seen some of the announcement and some of the changes, but we're focusing on continued to moderate the pace of compensation growth looking at our real estate footprint and again, the build out and utilization of our technical infrastructure.

James Friedland: Thank you. Sundar, Philipp, and I will now take your questions.

James Friedland: Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone.

Doug: Across the business.

Doug: Great. Thank you both.

James Friedland: To prevent any background noise, we ask that you please mute your line once your question has been stated.

Speaker Change: Thank you. Our next question comes from Eric Sheridan from Goldman Sachs. Your line is now open.

Brian Nowak: And our first question comes from Brian Nowak from Morgan Stanley. Your line is now open. Great. Thanks for taking my questions. I have two. The first one is sort of the macro advertising backdrop. Maybe Anat, I know it's April 24th and you call out some factors. You're kind of thinking about the second quarter. Any other factors you're seeing in advertising verticals or regions or categories that could be showing any signs of weakness quarter dates? We should think through any other changes from typical seasonality into Q25 versus prior quarters.

Eric Sheridan: Thank you for taking the questions first maybe for Sundar.

Speaker Change: Look across the consumer AI landscape today, how are you thinking about continuing to drive differentiation for Gemini is the platform through the lens of usage utility or putting product innovation at the forefront of driving consumer habits and then the second one may be for naught.

Speaker Change: If the macro environment were to change and become more downwardly volatile how should investors think about the investments that are must make this year almost fixed in nature versus where there might be more flexibility.

Philipp Schindler: Then the second one, Philipp, I think I heard you mention how the volume of commercial queries has increased. Maybe can you just walk us through which of the products are driving that increase in commercial queries? And as you sort of think about the pipeline of search products, are there any others that you're particularly excited about to kind of continue to drive further commercial query growth throughout 2526? Thanks.

Speaker Change: To alter the investment priorities of the company if the macro environment were to worsen. Thank you so much.

Speaker Change: Yeah.

Eric Sheridan: Thanks, Eric.

Speaker Change: It's an exciting moment on the AI front I think the foundation for everything is obviously the frontier model progress, we're seeing in particularly with 2.5 pro and Flash I think we are better position we are.

Anat Ashkenazi: So let me take the first one as well. We saw broad-based strength across ad verticals in Q1, and we saw it give you a bit of vertical color here. Search was led, again, by finance, due primarily to ongoing strength in the insurance, retail, healthcare, and travel, were actually also sizable contributors here to growth. With regard to Q2, we're only a few weeks in, so it's really too early to comment. We're obviously not immune to the macro environment, but we wouldn't want to speculate about potential impacts beyond noting that the changes to the minimus exemption will obviously cause a slight headwind to our ads business in 2025, primarily from APEC-based retailers.

Eric Sheridan: I think tremendous reception from developers enterprises and consumers too.

Speaker Change: And obviously, we are delivering consumer AI experiences.

Eric Sheridan: Across our product portfolio in <unk>.

Eric Sheridan: Voting.

Eric Sheridan: The primary way people experience. It is obviously in search with AI all of US in very early days with AI mode, but that will be a consumer Adi followed experience and.

Eric Sheridan: We are already seeing a very positive feedback queries are.

Eric Sheridan: Now people are typing in roughly two weeks longer queries compared to.

Eric Sheridan: Traditional search so.

Speaker Change: There's a lot of excitement there and in the Gemini App, which you asked about you.

Anat Ashkenazi: And maybe to zoom out, I would say we have a lot of experience in managing through uncertain times, and we focus on helping our customers by providing deep insights into changing consumer behavior that is relevant to their business. Examples are auction dynamics, query trend insights on topics like replacement purchases, and so on. So we have a lot of experience in this area. On the commercial query side, look, AI overviews continue to drive higher satisfaction and search usage, and as I noticed, Q1 was really our largest expansion to date for AI overviews, both in terms of launching to new users and providing responses for more questions, and that's really the core already of the answer.

Speaker Change: We've really seen increased momentum, particularly over the last few weeks SP have rolled it out not just the newer models.

Speaker Change: But we are seeing users are really responding well to all of the innovation Gemini life, which is based on project Astra.

Speaker Change: Has been very well received deep research I think based on 2.5 pro is Tata and that's been well received and canvas you've had a lot of traction as well and so we are definitely investing more.

Speaker Change: <unk> organized ourselves better to capitalize on this momentum and I'm excited about our roadmap there.

Philipp Schindler: AI overview sits at the center of your question here, and when it comes to other products, look, I don't want to speculate on this, but we're happy with what we're seeing here on AI overviews, and I'm confident we can expand this to more products over time. Thank you.

Speaker Change: And on the investments this year and overall should there be any macroeconomic changes.

Speaker Change: As I said, we're still planning to invest approximately $75 billion in Capex. This year, we do see a tremendous opportunity ahead of us across the organization, whether it's to support Google services cloud and Google Deep mine, we call Ive stated on the Q4 call that we exited the year in cloud specifically with more customer demand.

Doug Anmuth: Your next question is from Doug Anmuth from JPMorgan. Your line is now open. Great, thanks for taking the questions.

Speaker Change: And then we had capacity.

Speaker Change: And that was the case this quarter as well so we want to make sure we ramp up to support customer needs and customer demands.

Philipp Schindler: Phil, maybe just to go back to AI overviews for a moment. Can you just tell us how we should think about the one and a half billion AI overviews users just in terms of breadth of rollout? And I know you're saying monetization at approximately the same rate. But what does that mean in terms of click through rates and conversion?

Speaker Change: Having said that we're investing in long term and we're investing in innovation, that's the essence of our business.

Speaker Change: And we wanted to do it in a responsible fashion so you've seen us over the past.

Speaker Change: A couple of years and we're continuing to do this and you're seeing this in our results drive efficiency and productivity throughout the business.

Anat Ashkenazi: And then Anat, just curious if there have been any changes to Google's approach to durably reengineering the call space since you've joined? If macro weakens and we see more of a slowdown, would you expect to find additional opportunities to cut back more on costs? Thank you. Yeah, look, on the ads in AI overviews, late last year, actually, we launched them within the AI overviews on mobile in the US. And this builds on our previous rollout of ads above and below. So this was a change we have. But as I talked about it before, for AI overviews, overall, we see the monetization at approximately the same rate, which gives us a strong base on which we can innovate even more.

Speaker Change: And you know, we've announced things such as consolidation of teams, which helps not just with cost, but with velocity and speed, we're able to get things to market faster. So that's one of the areas, where we're focused on and you heard from some there. The last couple of calls and then just a rapid pace of innovation, we're bringing to the marketplace. So the way we're doing this across the business to drive productivity.

Speaker Change: Inefficiency should help us have a more resilient organization irrespective of macroeconomic condition, but certainly we don't ignore that we always look at what's happening outside the work of the organization as well as inside but invest appropriately to drive both the short term growth as well as the long term growth.

Philipp Schindler: So I'm very happy with this.

Anat Ashkenazi: I don't think this is the moment to go into the details of click through rates and conversion and so on. But overall, we're happy with. And to your question on our approach to productivity and efficiency, it hasn't really changed. I've mentioned my approach and our approach as a company on at the end of 2024. And we're still focused on driving efficiency and productivity throughout the organization, both in our operating expenses and in our CapEx. I've mentioned some of these during my prepared remarks, but certainly this helps us as we think about the investments we need to make in innovation to drive long-term sustainable growth profile for the company.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Ross Sandler from Barclays. Your line is now open.

Speaker Change: Oh, great. Thanks, one for Sundar one for Sundar.

Speaker Change: Sundar It was disclosed this week.

Speaker Change: And the trial, that's going on that Jim and I have 35 million da use and just.

Speaker Change: I'm just curious does that number obviously trail chats EBT by pretty wide margin could you just talk about the strategy to get that deal you figure much higher that you guys are deploying.

And then Phil just curious to hear what you're seeing on the brand advertising side of Youtube and <unk> and into early <unk>. Our brand is holding up relatively well like direct response or are they starting to react to some of these macro jitters that where we're at.

Anat Ashkenazi: We're able to repurpose some of these efficiencies into these investments, as well as, as you think about the increase in CapEx we've seen over the past several years and what we're investing this year, this will put additional pressure on the income statement in the form of depreciation. So we're working hard to try and offset some of these headwinds, as well as within the CapEx investments themselves, $75 billion. We're looking at how do we make sure every dollar is used efficiently? We have a highly rigorous process to determine the demand behind it. And then the allocation of the compute associated with our technical infrastructure investments, ensuring that we're utilizing that appropriately and that we're highly efficient with everything we're doing.

Speaker Change: All are experiencing any thoughts there. Thank you very much.

Speaker Change: Thanks, Ross I think I touched upon this to Eric's question as well, but Ah you know we are definitely I think.

Speaker Change: There's been a lot of momentum in terms of product features we've been introducing and you know we are definitely seeing.

Speaker Change: Reception, including increased adoption and usage based on those features so I think we are in a good positive cycle. The recent advances on the model frontier by.

Anat Ashkenazi: You've seen some of the announcement and some of the changes, but we're focusing on continuing to moderate the pace of compensation growth, looking at our real estate footprint, and again, the build out and utilization of our technical infrastructure across the business. Great, thank you both.

Speaker Change: By many metrics I think we have the best model out there now and I think I think that's going to drive.

Increased.

Speaker Change: Our option as well and again I would reiterate you know people are using now obviously, we have $1 5 billion users through.

Speaker Change: All of us are interacting with.

Eric Sheridan: Thank you. Our next question comes from Eric Sheridan from Goldman Sachs. Your line is now open. Thank you for taking the questions.

Speaker Change: With AI in a deep way in a very.

Speaker Change: And gateway, obviously, we are innovating with AI mode.

Sundar Pichai: First, maybe for Sundar, when you look across the consumer AI landscape today, how are you thinking about continuing to drive differentiation for Gemini as a platform through the lens of usage, utility or putting product innovation at the forefront of driving consumer habits?

Speaker Change: And we have a very exciting roadmap ahead of it.

Speaker Change: With the Gemini App as well so across the board are Super Super excited about what's ahead.

Speaker Change: And on your brand question brand and by the way also direct response had a very solid growth in Q1.

Brian Nowak: Brian advertise us really enjoyed cultural moments, we had like Coachella for example, our March madness.

Anat Ashkenazi: And then the second one, maybe for Anat, if the macro environment were to change and become more downwardly volatile, how should investors think about the investments that are must-make this year, almost fixed in nature versus where there might be more flexibility to alter the investment priorities of the company if the macro environment were to worsen? Thank you so much. Thanks, Eric. Obviously, it's an exciting moment on the AI front. I think the foundation for everything is obviously the frontier model progress we are seeing, and particularly with 2.5 Pro and Flash, I think we're well positioned.

Brian Nowak: Strong contributions overall from finance and retail verticals in Q1.

Brian Nowak: On the side as well.

Speaker Change: The operating metrics for Youtube was strong in Q1, what should I am growth remains robust, particularly in key monetization opportunity areas, such as shorts and living room.

Speaker Change: It's also by the way nice to see the strong position of our creators, who obviously benefit from the brand piece, which gives us a lot of confidence when we look at it more closely and on the Q2 side I think I mentioned, it's too early to really comment on that.

Sundar Pichai: We are seeing tremendous reception from developers, enterprises, and consumers too. And obviously, we are delivering consumer AI experiences across our product portfolio, including the primary way people experience it is obviously in search with AI overviews and very early days with AI mode, but that will be a consumer AI forward experience. And we are already seeing very positive feedback. Queries are, people are typing in roughly 2x longer queries compared to a traditional search. So there's a lot of excitement there. And in the Gemini app, which you asked about, we've really seen increased momentum, particularly over the last few weeks as we've rolled out, not just the newer models, but we are seeing users are really responding well to all the innovation.

Speaker Change: Thank you. Your next question is from Mark <unk> from Bernstein. Your line is now open.

Speaker Change: Great. Thanks for taking my questions.

Speaker Change: I appreciate the color on Gemini deployment across kind of the 15 products, what would happen 1 billion users or more it would be.

Speaker Change: Great to hear more about where youre seeing the most usage and deployment of Gen. AI internally I, Google, perhaps whether the capabilities are they in a place today in terms of either supplementing or augmenting the workforce.

Speaker Change: And just to build on that earlier AI mode type questions appreciate it.

Speaker Change: Excellent inquiries than traditional search, but any color you can share perhaps on how AI behavior differs from how consumers are using the Gemini app. Thank you.

Speaker Change:

Speaker Change: Look on internally I mean does it has been.

Speaker Change: Extraordinary.

Speaker Change: The focus and excitement.

Speaker Change: Because I think.

Sundar Pichai: Gemini Live, which is based on Project Astra, has been very well received. Deep Research, I think, based on 2.5 Pro is SOTA, and that's been well received in Canvas. We've had a lot of traction as well. And so we are definitely investing more. We have recently organized ourselves better to capitalize on this momentum, and I'm excited about our roadmap there. And on the investments this year, and overall, should there be any macroeconomics changes, you know, as I said, we're still planning to invest approximately $75 billion in CapEx this year. We do see a tremendous opportunity ahead of us across the organization, whether it's to support Google Services, Google Cloud, and Google DeepMind.

Speaker Change: Via the early use cases have been transformational in nature and I think the total field principally call it isn't long ways to go.

Speaker Change: Obviously I had mentioned a few months ago.

Speaker Change: In terms of how we are using AI for coding we are continuing to make a lot of progress there in terms of.

Speaker Change: People using coding solutions I think the last time I said the number was like 25% of code that's check them.

Speaker Change: Aten was people accepting <unk>. So just the solutions that number is well over 30% now, but more importantly, we have deployed a more deeper flows.

Speaker Change: And particularly with the newer models I think you know we are working on early Agentic workflows and and how we can get those coding experience to be much deeper.

Sundar Pichai: And recall, I've stated on the Q4 call that we exited the year in cloud specifically with more customer demand than we had capacity. And that was the case this quarter as well. So we want to make sure we ramp up to support customer needs and customer demands. And we said that we're investing in long term, and we're investing in innovation. That's the essence of our business. And we want to do it in a responsible fashion. So you've seen us over the past couple years, and we're continuing to do this, and you're seeing this in our results, drive efficiency and productivity throughout the business.

Speaker Change: We are deploying it across all parts of the company.

Speaker Change: Our customer service teams are deeply leading the way there.

Speaker Change: Both dramatically enhanced our user experience as well as made much more efficient to do so and we're actually bringing all our learnings and expertise and our solutions through cloud to our auto customers, but beyond that all the way from the finance team preparing for this earnings call to everything.

Speaker Change: It's deeply embedded in everything we do but I still see it as early days and there's going to be a lot more to do on on AI more look I think we are just leaning in on the early positive feedback.

Sundar Pichai: And, you know, we've announced things such as consolidation of teams, which helps not just with cost, but with velocity and speed, we're able to get things to market faster. So that's one of the areas we're focused on. You heard from Sundar the last couple of calls on just a rapid pace of innovation we're bringing to the marketplace. So the way we're doing this across the business to drive productivity and efficiency should help us have a more resilient organization, irrespective of macroeconomic condition. But certainly we don't ignore that. We always look at what's happening outside the organization as well as inside, but invest appropriately to drive both the short term growth as well as the long term growth.

Speaker Change: S B Scaleup aio abuse.

Speaker Change: It's been one of our most positive lunches and but it's been clear people that wanted to even more of it and so.

Speaker Change: You know what they are bringing the <unk> our state of the art Gemini models right into search and.

Speaker Change: And you know I mentioned.

Speaker Change: People typing in longer curious, there's a lot more complex nuanced questions people are following through more people are appreciating the clean design. The fast response time and the fact that they can kind of be much more open ended can undertake more complicated tasks product comparisons for example.

Sundar Pichai: Thank you.

Ross Sandler: Our next question comes from Ross Sandler from Barclays. Your line is now open. Great, thanks.

Philipp Schindler: One for Sundar, one for Philipp. Sundar, it was disclosed this week in the trial that's going on that Gemini has 35 million DAUs, and I'm just curious, that number obviously trails Chat2BT by a pretty wide margin. Could you talk about the strategy to get that DAU figure much higher that you guys are deploying?

Speaker Change: <unk> has been a positive one exploring how to is planning a trip. So those are the kinds of early feedback we are seeing and I think we're obviously really focused on improving the product.

Speaker Change: Across all of AI Modi I, all of us and the Gemini App and we are seeing positive user traction as well.

Sundar Pichai: And then Philipp, just curious to hear what you're seeing on the brand advertising side at YouTube in 1Q and into early 2Q. Are brands holding up relatively well, like direct response, or are they starting to react to some of these macro jitters that we're all experiencing? Any thoughts there? Thank you very much. Thanks, Ross. I think I touched upon this to Eric's question as well, but, you know, we are definitely, I think, you know, there's been a lot of momentum in terms of product features we've been introducing, and, you know, we are definitely seeing reception, including increased adoption and usage based on those features.

Mark Mahaney: Your next question is from Mark Mahaney from Evercore. Your line is now open.

Mark Mahaney: Okay, Thanks for that and one for Sundar.

Speaker Change: Getting back to a question I think that Doug was asking earlier on you just put up record high or multi year record high margins for both Google services and for Google Cloud you talk though about depreciation expenses accelerating rapidly throughout the year because of all the investments you've you've already.

Mark Mahaney: When people about.

Mark Mahaney: Back in the September quarter, you seem relatively confident that you had enough levers to kind of offset kind of rising infrastructure costs.

Mark Mahaney: That still you're six months later or is that still your view that you've got enough levers that even with the rising infrastructure costs. You can there's enough in there to kind of counterbalance that and then just briefly on weibo.

Sundar Pichai: So I think we are in a good positive cycle. The recent advances on the model frontier, by many metrics, I think we have the best model out there now. And I think that's going to drive increased adoption as well. And again, I would reiterate, you know, people are using, you know, obviously, we have 1.5 billion users through AI overviews, interacting with AI in a deep way, in a very engaged way. Obviously, we are innovating with AI mode. And, you know, we have a very exciting roadmap ahead with Gemini app as well. So across the board, super, super excited about what's ahead.

Mark Mahaney: That continues to rise aggressively the numbers Sundar the long term.

Mark Mahaney: <unk> business model for Weibo is there a reason to make a decision on that soon or do you have you already made the decision of whether this is a long term licensing model or you really want to run this as a standalone ridesharing delivery in autonomous vehicle.

Speaker Change: Thank you very much.

Speaker Change: Thanks, So on your first question on profitability and what levers do we have and do we still have levers to pull first I think every organization can always push a little further I don't view, our productivity goals, our efficiency as an episodic I'm kind of project based effort, but rather a continuous effort that when you get to Mr.

Philipp Schindler: And on your brand question, you know, brand and, by the way, also direct response had a very solid growth in Q1. Brand advertisers really enjoyed cultural moments we had, like Coachella, for example, or March Madness. We had strong contributions overall from the finance and retail verticals in Q1, on this side as well. The operating metrics for YouTube were strong in Q1. Watch time growth remains robust, particularly in key monetization opportunity areas such as shorts and living room. It's also, by the way, nice to see the strong position of our creators who obviously benefit from the brand piece, which gives us a lot of confidence when we look at it more closely.

Speaker Change: And place you push a little further.

Speaker Change: Having said that we do have significant investments, we're making across the organization and we have been making them for the past several quarters and.

Speaker Change: And we've been able to do it because we were able to find efficiency to fund those investments across the organization and those are for products and services around drive long term growth for the company.

Speaker Change: So well work and trying to offset as much of the headwind associated with the increase in infrastructure costs. It will become more difficult as I said, the depreciation will accelerate we had about a 31% year over year growth in depreciation this quarter and it will be higher as we go throughout the year. So.

Philipp Schindler: And on the Q2 side, I think I mentioned it's too early to really comment on that. Thank you.

Speaker Change: Think about that kind of as a headwind that we have to managed again, but were continuing with our pushing across the organization leveraging Sundar mentioned the use of AI.

Mark Shmulik: Your next question is from Mark Shmulik from Bernstein. Your line is now open. Great. Thanks for taking my questions. Sundar, I appreciate the color on Gemini deployment across kind of the 15 products with half a billion users or more. It would be great to hear more about where you're seeing the most usage and deployment of Gen AI internally at Google. Perhaps whether the capabilities, are they in a place today in terms of either supplementing or augmenting the workforce? And then just to build on that earlier AI mode type questions, I appreciate AI mode has, you know, 2x longer queries than traditional search.

Speaker Change: And as an AI first Google across several of our functions to help us manage a larger scope of work using our AI agents and AI tools. They're mentioned, we did deleverage it in preparation for the earnings call and we're leveraging across several functions.

Speaker Change: So there are opportunities, but there are also great opportunities for investment and we want to make sure that we make room for to make these investments to drive long term growth and ensure we have a very resilient long term growth profile for the company.

Sundar Pichai: But any color you can share perhaps on how AI mode behavior differs from how consumers are using the Gemini app. Thank you.

Speaker Change: And Mark Thanks, I think I think this is probably the first question I've got on an earnings call unveiled them. All so thank you and I think it's a sign of its progress.

Sundar Pichai: Look on internally, I mean, this has been, you know, extraordinary amount of focus and excitement, both because I think we are, you know, the early use cases have been transformative in nature, and I think this still feels like early days and long ways to go. Obviously, I mentioned a few months ago, you know, in terms of how we are using AI for coding, we are continuing to make a lot of you know, people using coding suggestions. I think the last time I said the number was like 25% of code that's checked in. It involves people accepting AI suggested solutions, that number is well over 30% now.

Speaker Change: Look the thing that excites me is I think we've been laser focused and will continue to be on building the world's best driver.

Speaker Change: And I think I think I think doing that well really.

Speaker Change: Really gives you a variety of.

Speaker Change: Optionality in business models across geographies et cetera. It will also require a successful ecosystem of partners and.

Speaker Change: We can possibly do it all ourselves and so I'm excited about the progress.

Speaker Change: The teams have made through a variety of partnerships obviously.

Speaker Change: A highlight of it is a partnership with.

Sundar Pichai: But more importantly, we have deployed more deeper flows. And particularly with the newer models, I think, you know, we are working on early agentic workflows and how we can get those coding experiences to be much deeper. We are deploying it across all parts of the company. You know, our customer service teams are deeply leading the way there. We've both dramatically enhanced our user experience as well as made it much more efficient to do so. And we are actually bringing all our learnings and expertise in our solutions through cloud to other customers. But beyond that, all the way from the finance team preparing for this earnings call to everything, you know, it's deeply embedded in everything we do.

Speaker Change: With Uber, we are very pleased with what we are already seeing in Austin in terms of what either satisfaction.

Speaker Change: Forward offering the first paid rights in Atlanta, we are Uber later this year.

Speaker Change: But we are also building up a network of partners for example for maintaining fleets of vehicles and doing all the operations related to that.

Speaker Change: With the recently announced partnership with <unk> in Phoenix, and Miami, obviously partnerships with Oems.

Speaker Change: There are future optionality around personal ownership as well so we are widely exploring.

Speaker Change: And but at the same time.

Clearly staying focused and making progress both in terms of safety the driver experience and our progress on the business model and operationally scaling it up.

Sundar Pichai: But I still see it as early days and there's going to be a lot more to do.

Speaker Change: Okay. Thank you very much.

Speaker Change: Yes.

Sundar Pichai: On AI mode, look, I think we are just leaning in on the early positive feedback as we scaled up AI overviews. It's been one of our most positive launches. But, you know, it's been clear people have wanted even more of it. And so, you know, with AI mode, we are bringing our state-of-the-art Gemini models right into search. And, you know, I mentioned people typing longer queries. There's a lot more complex, nuanced questions people are following through more. People are appreciating the clean design, the fast response time, and the fact that they can kind of be much more open-ended, can undertake more complicated tasks.

Speaker Change: Thank you. Our next question comes from Ken Goralski from Wells Fargo. Your line is now open.

Speaker Change: Thank you two if I may please first on on AI powered search.

Speaker Change: You have a number of AI powered search interfaces.

Speaker Change: Including three most prominently AI overviews AI mode in Gemini.

Speaker Change: In the future should we think of these as distinct experiences or that will be long lasting or more experimental now and will and Google will eventually focus on one approach going forward.

Speaker Change: And the second one is more on.

Speaker Change: On the financial side, you continue to experience very healthy gross margin expand expansion.

Sundar Pichai: Product comparisons, for example, has been a positive one, exploring how-tos, planning a trip. So those are the kinds of early feedback we are seeing. And, you know, I think we are obviously really focused on improving the product across all of AI mode, AI overviews, and the Gemini app. And we are seeing positive user traction as well. Thank you.

Speaker Change: We see the Tac.

But.

Speaker Change: You also talked about the offsetting depreciation expense could you talk about beyond those two buckets, where you're seeing that be the real savings on the Cogs line and driving that gross margin expansion and maybe even how you how.

Speaker Change: How we should be thinking about that going forward. Thank you.

Speaker Change: Okay, now maybe an AI powered search and how do we see our consumer experience look I do think search and Gemini obviously it will be.

Mark Mahaney: Your next question is from Mark Mahaney from Evercore. Your line is now open. Okay, thanks.

Speaker Change: Two distinct efforts right I think there are obviously some areas of overlap, but there also.

Anat Ashkenazi: One for Anat and one for Sundar. Anat, getting back to a question I think that Doug was asking earlier on, you just put up, you know, record high or multi-year record high margins for both Google services and for Google Cloud. You talked, though, about depreciation expenses accelerating rapidly, you know, throughout the year because of all the investments you've already, you know, you've warned people about. Back in the September quarter, you seemed relatively confident that you had enough levers to kind of offset, you know, kind of rising infrastructure costs. Was that still your, you know, six months later, is that still your view that you've got enough levers that even with the rising infrastructure costs you can, there's enough in there to kind of counterbalance that?

Speaker Change: Exposed very very different use cases, and so for example in Gemini V. C people creatively coding and going much deeper on our quoting workflow as an example, so I think both will be around within search.

Speaker Change: I would think of.

Speaker Change: All of us scaling up and working for our entire user base, but an AI mode is the tip of the tree for us pushing forward on our AI forward experience, there will be things, which we discovered there which will may which would make sense in the context of AI all of us. So I think I think it will flow through to our user base.

Anat Ashkenazi: And then just briefly on Waymo, that continues to rise aggressively, the numbers, Sundar, the long-term business model for Waymo, is there a reason to make a decision on that soon or have you already made the decision of whether this is a long-term licensing model or you really want to run this as a standalone ride sharing delivery, you know, autonomous vehicle business? Thank you very much. Thanks. On your first question on profitability and what levers do we have and do we still have levers to pull? First, I think every organization can always push a little further.

Speaker Change: But you almost want to think of what are the most advanced 1 million people using search for the most advanced 10 million people and then how do a billion and a half people use search for and we want to innovate and so I think this allows us to do that but the truth not through all of this as you know.

Speaker Change: User feedback user satisfaction user experience and so that will determine where this all works out in the future.

Speaker Change: And to your question on gross margin a couple of trends to highlight there and I've mentioned this in the prepared remarks, you've seen improvement in tech that's really.

Anat Ashkenazi: I don't view productivity goals or efficiency as an episodic kind of project based effort, but rather a continuous effort that when you get to a certain place, you push a little further. Having said that, we do have significant investments we're making across the organization, and we have been making them for the past several quarters. And we've been able to do it because we were able to find efficiency to fund those investments across the organization. Those are for products and services that are going to drive long-term growth for the company. So while we're trying to offset as much of the headwind associated with the increase in infrastructure costs, it will become more difficult.

Speaker Change: Driven by the change in revenue mix.

Speaker Change: With our continued search gross and then network revenue declines network revenue has a much higher tax rate.

Speaker Change: So that mix is helping us from a gross margin perspective, so think about that as well now we do have depreciation.

Speaker Change: For technical infrastructure hits in two places primarily in two places in the income statement. One is in other cost of sales and the rest is in R&D.

Speaker Change: So it is in that line item that's impacting cost of sales now we've had some efficiencies there and I did mention the improvement in our.

Anat Ashkenazi: As I said, the depreciation will accelerate. We had about a 31% year-over-year growth in depreciation this quarter, and it will be higher as we go throughout the year. So think about that kind of as a headwind that we have to manage against, but we're continuing with pushing across the organization, leveraging, Sundar mentioned the use of AI and kind of an AI-first Google across several of our functions to help us manage a larger scope of work using our AI agents and AI tools. As Sundar mentioned, we did deleverage it in preparation for the earnings call and we're leveraging across several functions.

Speaker Change: Overall cost of them.

Speaker Change: Alright, and head count growth and compensation kind of moderating those growth so that helps us as well.

Speaker Change: <unk> more than offset the depreciation increases in Q1, but as I've mentioned this number will be higher in the coming quarters recall, we have we said approximately $75 billion.

Speaker Change: In Capex, which is up from 55 or just over 50 billion last year. So there is there is expected to be quite a significant increase in depreciation.

Anat Ashkenazi: So there are opportunities, but there are also great opportunities for investment. And we want to make sure that we make room for to make these investments to drive long-term growth and ensure we have a very resilient long-term growth profile for the company. And Mark, thanks.

Speaker Change: Thank you and our last question comes from Ron Josey from Citi. Your line is now open.

Ron Josey: Alright, Thanks for taking the question Philip I wanted to touch all of it more on your comments around direct response, and Youtube I think that improving and been a driver over the past couple of quarters, but love to hear more just about what's driving that is that the demand gen and integration with peanuts or our users perhaps more involved on direct response now that shorts usage are driving would love your thoughts.

Sundar Pichai: I think this is probably the first question I've got on an earnings call on Waymo, so thank you, and I think it's a sign of its progress. Look, you know, the thing that excites me is I think we've been laser focused and will continue to be on building the world's best driver. And I think doing that well, you know, really gives you a variety of optionality in business models across geographies, et cetera. It'll also require a successful ecosystem of partners, and, you know, we can't possibly do it all ourselves. And so I'm excited about the progress the teams have made through a variety of partnerships.

Thank you.

Ron Josey: Yes, I think there's a lot of different factors, mostly we continue to help our customers are really using our AI powered tools you mentioned a few of them to drive performance. So that's a very big one as I mentioned before we're also happy with the <unk>.

Ron Josey: We are seeing on shorts.

Ron Josey: In closing to the monetization gap here to the overall business, which is actually a really nice to see especially in the U S. So we're very happy with that.

Ron Josey: Yes.

Sundar Pichai: Obviously, you know, a highlight of it is our partnership with Uber. We are very pleased with what we are already seeing in Austin in terms of rider satisfaction. We look forward to offering the first paid rides in Atlanta via Uber later this year. But we are also building up a network of partners, for example, for maintaining fleets of vehicles and doing all the operations related to that with the recently announced partnership with Move in Phoenix and Miami, obviously partnerships with OEMs. You know, there are future optionality around personal ownership as well. So we are widely exploring, but at the same time, clearly staying focused and making progress, both in terms of safety, the driver experience, and progress on the business model and operationally scaling it up.

Speaker Change: I'll just chime in to say Youtube just celebrated its 20th birthday him.

Speaker Change: We now have more than 20 20 billion videos on Youtube and we get 20 million videos uploaded every day. So I think it's a tremendous platform and thanks to all of the creators and users who have supported us over the years.

Speaker Change: Great. Thank you.

Speaker Change: Thank you and that concludes our question and answer session for today I would like to turn the conference back over to Jim Freeland for any further remarks.

Speaker Change: Thanks, everyone for joining us today, we look forward to speaking with you again on our second quarter 2025 call. Thank you and have a good evening.

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

Sundar Pichai: Okay, thank you very much. Thank you.

Kent Gawrelski: Our next question comes from Kent Gawrelski from Wells Fargo. Your line is now open. Thank you.

Kent Gawrelski: Two, if I may, please. First on AI-powered search. You have a number of AI-powered search interfaces, including three, most prominently AI Overviews, AI Mode, and Gemini. In the future, should we think of these as distinct experiences that will be long lasting or more experimental now, and Google will eventually focus on one approach going forward?

Anat Ashkenazi: And the second one is more on the financial side. You continue to experience very healthy gross margin expansion. We see the TAC, sure, but you also talked about the offsetting depreciation expense. Can you talk about beyond those two buckets, where you're seeing the real savings on the COGS line and driving that gross margin expansion? And maybe even how we should be thinking about that going forward.

Sundar Pichai: Thank you. Ken, maybe on AI-powered search and how do we see our consumer experiences? Look, I do think search in Gemini obviously will be two distinct efforts, right? I think there are obviously some areas of overlap, but they're also, you know, like expose very, very different use cases. And so, for example, in Gemini, we see people iteratively coding and going much deeper on a coding workflow as an example. So I think both will be around. Within search, you know, I would think of AI overviews as scaling up and working for our entire user base, but an AI mode is the tip of the tree for us pushing forward on an AI-forward experience.

Sundar Pichai: There will be things which we discover there which will make sense in the context of AI overviews. So I think we'll flow through to our user base. But you almost want to think of what are the most advanced 1 million people using search for, the most advanced 10 million people, and then how do a billion and a half people use search for? And, you know, we want to innovate, and so I think this allows us to do that. But the true north through all of this is, you know, user feedback, user satisfaction, user experience. And so that will determine where this all works out in the future.

Anat Ashkenazi: And to your question on gross margin, a couple of trends to highlight there. And I've mentioned this in the prepared remarks. You've seen improvement in tech that's really driven by the change in revenue mix, with a continued search growth and then network revenue declines. Network revenue has a much higher tech rate. So that mix is helping us from a gross margin perspective. So think about that as well. Now, we do have depreciation for technical infrastructure hits in two places, primarily in two places, in the income statement. One is in other costs of sales and the rest is in R&D.

Anat Ashkenazi: So it is in that line item that's impacting costs of sales. Now, we've had some efficiencies there, and I did mention the improvement in our overall cost of headcount growth and compensation, kind of moderating those growth. So that helps us as well, more than offset the depreciation increases in Q1. But as I mentioned, this number will be higher in the coming quarters. Recall, we have we said approximately seventy five billion dollars in CapEx, which is up from fifty five or just over fifty billion last year. So there is there is expected to be quite a significant increase in depreciation.

Anat Ashkenazi: Thank you.

Ron Josie: And our last question comes from Ron Josie from Citi. Your line is now open. Great, thanks for taking the question.

Philipp Schindler: Philipp, I wanted to touch a little bit more on your comments around direct response and YouTube. I think it's been improving and been a driver over the past couple quarters. I'd love to hear more just about what's driving that. Is that the demand gen and integration with PMax? Or are users perhaps more involved on direct response now that short usage is rising? Would love your thoughts there. Thank you. Yeah, I think there's a lot of different factors. Mostly, we continue to help our customers really using our AI power tools. You mentioned a few of them to drive performance.

Philipp Schindler: That's a very big one. As I mentioned before, we're also happy with the progress we're seeing on shorts and closing to the monetization gap here to the overall business, which is actually really nice to see, especially in the US. So we're very happy with that. Yeah.

Sundar Pichai: And, you know, I'll just chime in to say YouTube just celebrated its 20th birthday. And, you know, we now have more than 20 billion videos on YouTube and we get 20 million videos uploaded every day. So I think it's a tremendous platform. And thanks to all the creators and users who have supported us there over the years. Great, thank you. Thank you.

James Friedland: And that concludes our question and answer session for today. I would like to turn the conference back over to Jim Friedland for any further remarks. Thanks everyone for joining us today. We look forward to speaking with you again on our second quarter 2025 call. Thank you and have a good evening. Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.