Q2 2025 Alphabet Inc Earnings Call

July 23, 2025

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We are nowhere in Egypt of love.

No.

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Speaking of Canada.

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Hi.

So we're feeling good.

You understand.

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Now Brian.

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Thank you.

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Yes.

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Happy birthday Youtube.

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Falling into place.

It feels pretty clear in my head.

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As a possibility.

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I'm looking down at myself and my characters in these different worlds and it's almost coming to life on their own even though I know I'm in control of that scenario.

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You could have an infinite amount of endings to your story.

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Hi, Brent.

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So to recap Sarah you'll be optimizing our Google AD campaign for the summer collections, yet on and making that summer collections New performance no problem can you double check the product and dream.

Speaker Change: So which marketing channels are driving the highest converting users plus engage with our content phenomenon.

In the past four weeks.

Speaker Change: Okay.

Speaker Change: Hi.

That's traditional in stream on Youtube.

Speaker Change: Okay.

Speaker Change:

And in some countries.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Hi.

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: Okay.

It brings AI to people all over the world.

Speaker Change: Right.

I'll briefly touch on AI stack before turning to quarterly highlights.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Hum.

First AI infrastructure.

Speaker Change: Okay.

We operate the leading global network of AI optimized data centers and cloud regions.

Speaker Change: Okay.

We also offer the industry's widest range of Cpus, and Gpus, along with storage and software.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: That's why nearly all Jane AI unicorns use Google cloud.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: It's why in growing number, including leading AI research labs like safety Super intelligence, and physical intelligence, New CPU specifically.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers.

Speaker Change: Okay.

Speaker Change: Next World Class, AI research, including laurels and tooling.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: We continue to expand our Gemini 2.5 family of hybrid reasoning models, which provide industry leading performance in nearly every major benchmark.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: In addition to improving our popular workhorse model slash Intermune and extremely fast flash.

Speaker Change: Okay.

Speaker Change: Flashlight version.

Speaker Change: Okay.

Speaker Change: We achieved goldminer level performance in the International Labs Olympiad, using an advanced version of Gemini and deeply.

Speaker Change: One of these ads has malware.

Speaker Change: You tell me well the unicorns give me extra tokens.

Speaker Change: Can't wait to bring deep thing to users soon.

Speaker Change: Typically the delivery at Peninsula should do you like pizza.

Speaker Change: There are some of the best models available today at every price point or.

Speaker Change: It can't be her.

Speaker Change: Okay.

Speaker Change: 2.5 models have been a catalyst for growth.

Speaker Change: Kenneth.

Speaker Change: It may not be able to tell which app is a trap the cocoa plant can absent Google Franco to.

Speaker Change: 9 million developers have now been for Gemini.

Speaker Change: I also want to mention V O three our state of the art video generation model.

Speaker Change: There are over 10000 safety checks.

[music] seems foreign tourists to coupons.

Speaker Change: It's been a vital head and people sharing clips created in the Gemini App.

Speaker Change: Next time stays safer with Google play.

Speaker Change: And with our new AI filmmaking too slow.

Speaker Change: How are you finding the festival.

Speaker Change: Since may or 70 million videos have been generated using meal III.

Speaker Change: Proper love it I'm in my element.

Speaker Change: So now why everyone always complains about the weather.

Speaker Change: And we recently introduced a feature in the Gemini App to turn photos intermediates, which people absolutely love it.

Speaker Change: Your question will come thing essential.

Speaker Change: Definitely.

Speaker Change: And so I will not address why are you here.

Speaker Change: It's also rolling out to Google photos users starting today.

Speaker Change: So the free love.

Speaker Change: Third our products and platforms, we are bringing AI to all our users and partners through surfaces like workspace growing at all.

Speaker Change: Okay.

Speaker Change: I'm not really have the music MAU.

Speaker Change: Rosemary aligned in the restoration Mad dog and letting everyone know about it on social media is this your first time gosh no. It's also commercial now I was hearing 67, one Falcons breath like for 14 hours strike cosmic event.

Speaker Change: The growth in usage has been incredible.

Speaker Change: I O in May we announced that we processed 480 trillion monthly tokens across our surfaces.

Speaker Change: Hey with kids.

Speaker Change: Since then we have doubled that number now processing over 980 trillion monthly tokens a remarkable increase.

Speaker Change: How naive now we always bring them. It is important to expose them to the poetry said from a young age how did you get back stage.

Speaker Change: So VIP products actually made.

Speaker Change: The Gemini App now has more than 450 million monthly active users and we continue to see strong growth and engagement daily request growing over 50% from Q1.

Speaker Change: Basically the DJ PFS for life, we got everybody together.

Speaker Change: I'm excited for the headliner, yes, but I'm going to start towards the back the last time I was in the past.

Speaker Change: So if someone's eye out for.

Speaker Change: In June alone or 50 million people use to AI powered meeting notes and gloomy.

Speaker Change: John.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Powered by V O three our new short video product in workspace called Google Meds reached nearly 1 million monthly active users.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Can you say the stage for about that.

Speaker Change: Next month at Samsung Galaxy, Unpacked, the announced new Android and AI features.

Speaker Change: No.

Speaker Change: Okay.

Speaker Change: Available on Samsung's latest devices.

Speaker Change: Okay.

Speaker Change: And we are really pleased with the growth in subscriptions, which got a boost from our Google AI pro another truck plants.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Now some key highlights from search cloud Youtube and memo for the quarter.

Speaker Change: Oh sure.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: First up.

Speaker Change: Yes.

Speaker Change: Credibly exciting moment for such.

Speaker Change: Okay.

Speaker Change: We see AI powering and expansion and how people are searching for and accessing information unlocking completely new kinds of questions you can ask Google.

Speaker Change: Hum.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Or all queries and commercial quantities on search continued to grow year over year.

Speaker Change: Okay.

Speaker Change: Our new AI experience has significantly contributed to this increase in usage.

Speaker Change: Yes.

Speaker Change: Oh.

Speaker Change: Okay.

Speaker Change: We are also seeing the AI features cost users to search more.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: As they learn that search can meet more of their needs.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: That's especially true for younger users.

Speaker Change: Okay.

Speaker Change: Let me go deeper on our new search experiences.

Speaker Change: Sure.

We know how popular views are because they are now driving or 10% more countries globally.

Speaker Change: Which of these partners show that data for the ratio of hernia.

Speaker Change: The article mentioned that the arms crossed pose can look confident and relaxed on a podium project are cool and collected winter now thanks, Kevin.

Speaker Change: The types of queries that showed them and this growth continues to increase over time.

Speaker Change: I all views are now powered by Gemini 2.5, delivering the fastest AI responses in the industry.

Speaker Change: That's correct.

Speaker Change: Okay.

Speaker Change: But.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: We also saw strong growth in the use of multimodal search, particularly in a combination of land so circling to search together the day I owe abuse.

pixel: Okay pixel. So remember last time, we talked about how people think I'm doing the same thing as you, but it's all just like a crazy coincident totally crazy well, what's even crazier as I just announced all these new features than people think I'm doing it again, no way way, so like we announced life translation.

Speaker Change: This growth was most pronounced among younger users.

Speaker Change: Our new end to end AI search experience AI mode continues to receive very positive feedback, particularly for longer and more complex questions.

pixel: For text messages right and it turned out I had that four years ago, Yeah, Crazy coincidence, and I announced hold assist and it turned out I had that five years ago, Yeah. So wild and hear this I announced call screening and it turned out I had that seven years ago, Yeah, I mean, what are the chances.

Speaker Change: It's still rolling out, but already has over 100 million monthly active users in the U S and India.

Speaker Change: We plan to keep enhancing the AI won't experience for users by shipping great features fast.

Speaker Change: That includes our advanced research too deep search and more personalized responses.

Speaker Change: Next to Google cloud.

pixel: So crazy so crazy unbelievable totally unbelievable.

Speaker Change: We see strong customer demand driven by our product differentiation.

Speaker Change: Comprehensive product portfolio.

Speaker Change: So what are you working on for pixel Tien just like out of curiosity.

Speaker Change: Stat showed this one the number of deals over $250 million doubling year over year.

pixel: Sure.

pixel: Oh hi.

Speaker Change: Two in the first half of 2025, we signed the same number of deals over $1 million and we did in all of 2024.

pixel: Okay.

pixel:

pixel: All right.

pixel: Uh huh.

pixel: Yeah.

Speaker Change: Three a number of new GCB customers increased by nearly 28% quarter over quarter.

pixel: Yeah.

pixel: [music].

Speaker Change: Okay.

Speaker Change: Any 5000 enterprises, including EMEA, much Salesforce and Singapore's DBS back now been with Gemini.

pixel: Yeah.

Speaker Change: Driving a 35 X growth in Gemini usage year over year.

pixel: Okay.

pixel: Yes.

Speaker Change: Our models have served on our AI infrastructure, which offers industry, leading performance and cost efficiency for both training and inference.

pixel: Yes.

pixel: Mhm.

pixel: [music] can.

Speaker Change: Along with our AI accelerators, we introduced new innovations in storage, including anywhere cash, which improves in France, Nate and see by up to 70%.

pixel: Can you.

pixel: Make a bunch of like two study circles explode out of my mouth.

pixel: And updated.

pixel: Okay.

pixel: Yes.

Speaker Change: Rapid storage, which delivers a <unk> improvement in latency compactor, leading hyperscale.

pixel: Yeah.

pixel: Okay.

pixel: Okay, what should we built nextgen, okay, here's another 30 ideas for you.

Speaker Change: In addition, we have optimized AI software packages, including by Hitachi Jacks with full open source supports or various AI training and having demands.

Speaker Change: We are also integrating AI agents deeply into each of our cloud products.

pixel: Okay.

pixel: The scandal.

Speaker Change: Mayfair SLM, ranging our databases integrated with AI to streamline data pipelines.

pixel: It is.

pixel: Okay.

pixel: We're easy to find again.

Speaker Change: All of our more personalized customer experiences.

pixel: Sports is Ed.

Speaker Change: Atlanta is leveraging our Gemini powered data agents and Macquarie.

pixel: Okay.

Speaker Change: On product feedback more quickly.

pixel: Hi, there.

Speaker Change: Harlan is using our Gemini parts aren't intelligence and security operations agents.

pixel: LTV is your favorite sports and live television.

Speaker Change: So you can easily wash the gains you want Jason you still here sorry, Rick.

Speaker Change: They improved cyber security cab.

pixel: Okay.

Speaker Change: Cap Gemini is utilizing our AI software engineering agents to <unk>.

pixel: Yeah.

pixel: [music].

Speaker Change: Denver higher quantity software faster by automating tasks.

pixel: Thank you and have signed up and see them.

Speaker Change: Cogeneration to testing.

pixel: Please go ahead.

Speaker Change: And BBVA, SaaS, Gemini and Google Workspaces saving employees.

pixel: Additionally, the data.

pixel: Hello.

pixel: Sure Scott.

Speaker Change: Nearly three hours per week by automating representative tasks.

pixel: Okay.

pixel: Yes.

Speaker Change: Now rolling it out to 100000 employees globally.

pixel: Yeah.

pixel: Yes.

Speaker Change: We're also focused on building a flourishing AI agent ecosystem.

pixel: Yes.

pixel: Nobody can.

Speaker Change: We introduced an open source engine development, which now has over 1 million downloads in less than four months.

pixel: And then what else did I just make it.

pixel: To make it stronger consider adding more triangles to the design.

Speaker Change: We also introduced agent space, an open and interoperable enterprise chat search and agent platform.

pixel: Yeah.

pixel: Okay.

pixel: Thank you.

pixel: Yes.

Speaker Change: Gordon Foodservice is bringing agents space to its U S employees, which is enabling better more efficient decision making.

pixel: They like it.

pixel: And one of Goldman.

pixel: Thanks Niccolo.

Speaker Change: And over 1 million subscriptions have been booked for agent space.

pixel: Okay.

pixel: Thank you so much.

Speaker Change: Ahead of its general availability.

pixel: Okay.

Speaker Change: Turning now to Youtube Nielsen data shows you too much land use streaming watch time for over two years.

pixel: Thank you.

pixel: How much do you mean.

pixel: I understand.

pixel: Gotcha.

Speaker Change: A generation that grew up with Youtube on their devices and now increasingly watching their favorite creators and content on their TV.

pixel: Yes.

pixel: Yeah.

pixel: Thank you so much.

pixel: No.

Speaker Change: That includes millions of sports fans too.

pixel: Got it.

pixel: How much can be with you.

Speaker Change: Globally, they can see more than 40 million hours of sports content on Youtube annually.

pixel: <unk> de La <unk>.

Speaker Change: And in September we'll streamline efforts first Friday game of the season life from Brasil plural.

Brian: Sure Brian.

Brian: Thank you Niccolo.

Speaker Change: From sports to shocks me now average over 200 million daily views on Youtube shorts.

Brian: This is Ted Ted was born in 1998, the year of the first Google search and as a teenager whenever Ted was looking for Google helped him find it changed.

Speaker Change: He is helping improve our recommendations and auto dumping.

Speaker Change: This translates to better terms for creators and brands by dramatically increasing the potential audiences. They can reach.

Brian: Video.

Brett: My wife is Brett.

Brett: So we're not as year after year there was always some new question on his mind.

Speaker Change: Today, we began rolling out a whole raft of new AI tools for creators on Youtube shops.

Speaker Change: Finally, Youtube continues to diversify its subscription options recently, expanding its premium light offerings to 15, new countries with more to come.

Brett: Ted has 26 now as life isn't so simple Fortunately Google still is why is this not working well.

Brett: Even when these questions are a lot of questions in one.

And lastly, Maimone continues to scale and expand to safely serve more writers in more places last month mainland launch in Atlanta more than doubling its Austin Sonoma century, and expand and it's Los Angeles, and San Francisco Bay area territories by approximately 50%.

Brett: But something cool happening Tonight in the city and so it gets me home in a reasonable time.

Brett: [music].

Brett: Well, which is how said found something they didn't even know he was looking for.

Brett: Hey, it turns out that might split question. Luckily you can just ask Google.

Speaker Change: I'm also launched teen accounts, starting with Ryan S. H folding to 17 in Phoenix.

Speaker Change: Overall, great momentum here.

Brett:

Speaker Change: I'm on driver has now autonomously, driven or 100 million miles on public roads.

Brett: Okay.

Brett: [laughter].

Speaker Change: And the team is testing across more than 10 cities this year, including New York and Philadelphia.

Brett: I see.

Brett: Infinite possibilities for slow manner of magic is that.

Speaker Change: We hope to serve writers in all 10 in the future.

Brett: AI mode is the biggest revolution into the search engine was incentive you tell Gemini exactly what you want belt and absorbed it for you.

Speaker Change: As I said a standout quarter.

Speaker Change: Thank you as always to our employees and partners for an amazing Q2.

Jim: Coding with Jim and I to five approach.

Jim: Is awesome project Mariner is going to change how we use our browsers.

Speaker Change: Over to you.

Dara: Thanks, So Dara Hello, everyone.

Jim: Hi ages it gets things done for your notebook Lm's mine that completely transforms warning.

Dara: Ill quickly cover performance for Google services for the quarter Vince structure. The rest of my remarks around the great progress, we are delivering across search ads Youtube and partnerships.

Jim: This person.

Jim: And Mark just your shadow.

Dara: Google Services revenues were <unk> 83 billion for the water up 12% year on year, driven by strong growth in search and Youtube, partially offset by year on year decline in network revenues.

Jim: Uh huh.

Jim: Yes.

Jim: AI is completely changing how we fight fires generative media is expanding the boundaries of creativity.

Dara: To add some further color to our results.

Jim: This isn't just another tool is a game changer.

Dara: A 12% increase in search and other revenues was led by growth across all verticals with the largest contributions from retail and financial services.

Jim: The potentials are almost limitless.

Jim: Okay.

Dara: Youtube saw similar performance across verticals, it's 30% growth in advertising revenues was driven.

Jim: [music].

Dara: Okay.

Dara: Starting with search and other revenues, which delivered over 54 billion in revenue for the quarter.

Dara: Shifts like AI or what propels our industry forward Gemini native multi modality is helping bring the offline audio and visual world back into the OLED world, creating a number of opportunities for search let me share a few examples.

Jim: Yes.

Jim: Hum.

Jim: Okay.

Jim:

Jim: Uh huh.

Speaker Change: <unk> original course hoogland searches so what are the fastest growing core types of search.

Jim: Hum.

Jim: Okay.

Dara: 70% since this time last year the.

Jim: Yeah.

Dara: The majority of lids searches are incremental and we're seeing healthy growth for shop inquiries using lifts.

Jim: [music].

Dara: And you can obviously take this to the next level by moving from image to video based capabilities like search Mike.

Dara: And then Theres circle to search, which is known over 300 billion Android devices.

Dara: But adding capabilities to help people explore complex topics.

Jim: Yes.

Dara: Follow up questions without switching jobs.

Dara: For example, gamers can though you circle to search while playing mobile games overview or outsource.

Jim: Yeah.

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

Dara: And just last week, we brought a new egencia capability directly into search for all U S use us with AI powered calling to local businesses find.

Speaker Change: At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

Dara: Finally shopping where in Q2, we introduced a virtual try on experience for search lapsed users in the U S. P.

Speaker Change: To ask a question during the session you will need to press star one on your telephone I would now like to hand, the conference over to your speaker today, Jim Friedland head of Investor Relations. Please go ahead.

Dara: People can try billions of clothing products of themselves virtually.

Dara: Early results and engagement have been extremely positive, particularly with Gen Z users and will be bringing this functionality to all U S use us admittedly.

Speaker Change: Thank you good afternoon, everyone and welcome to the alphabet second quarter 2025 earnings conference call with US today are Sundar Pichai Philipp Schindler and did not Ashkenazi now I'll quickly cover the safe Harbor.

Dara: All of these innovations are opening up a completely new ways for people to use technology, bringing the offline world into the online world in ways that simply have not been possible before.

Speaker Change: Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking.

Dara: Add in our amazing AI translation capabilities, and just imagine the possibilities people can access more content that the language businesses large and small international or local can reach even more customers.

Speaker Change: Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties.

Speaker Change: Actual results could differ materially.

Dara: I'm excited about how all of these elements will come together and the opportunities ahead of us of search.

Speaker Change: Please refer to our forms 10-K, and 10-Q, including the risk factors, we undertake no obligation to update any forward looking statement.

Dara: Moving to assets, where our strategy to reinvent the entire marketing process with AI is delivering value for our customers and our business.

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 Xyz forward Slash investor.

Dara: Last quarter, we introduced a IMAX in search of new suite of airport features an existing search campaigns advertiser.

Dara: Advertisers that activate <unk> and search campaigns typically see 14% more converts.

Dara: On media buy smart bidding exploration the biggest uptick to bidding strategy in a decade brings better performance to advertise us by allowing them to bid on a less obvious but potentially higher value course more often.

Speaker Change: Our comments will be on year over year comparisons unless we state otherwise and now I will turn the call over to Sundar.

Sundar Pichai: Thanks, Jim Good afternoon, everyone.

Dara: Campaigns, using smart bidding exploration, a 19% increase in conversions beverage.

Sundar Pichai: Q2 was a standout quarter for us with robust growth across the company.

Dara: Imagine continues to drive revenue growth deliver measurable impact for customers ethics.

Sundar Pichai: As you saw in Io, we are leading in the frontier of AI and shipping at an incredible pace.

Speaker Change: As an example, deepak etsy resale clothing marketplace use the shorts only dimension campaigns to drive new customers to the site.

Sundar Pichai: AI is positively impacting every part of the business driving strong momentum.

Dara: Shorts drove 80% by our bread loaf of Doubleclick rich versus benchmarks.

Sundar Pichai: This quarter.

Sundar Pichai: Each delivered double digit revenue growth.

Dara: Accretive we launched asset studio using our latest models to help businesses large and small generate creative assets.

Sundar Pichai: <unk> features continuing to perform well.

Sundar Pichai: <unk> has launched in the U S and India and is going well.

Dara: Small businesses benefit from top quality assets of deployment scaling capabilities, but larger businesses can go faster from proof of concept to launch and resize at lower costs.

Sundar Pichai: While AI all views now has over 2 million monthly users across more than 200 countries and territories and 40 languages.

Dara: Our 2 million advertisers low use google's AI power generation tools to run that.

Sundar Pichai: I will give some more details on <unk> in a moment.

Sundar Pichai: We continue to see strong performance in Youtube as well as subscriptions, reflecting great momentum across these high growth businesses.

Dara: 50% increase over this time last year.

Dara: Turning to Q2, where we saw continued strong revenue growth driven by direct response, followed by Brett.

Brett: Youtube creators are connected to the global zeitgeist trusted by their audiences like no others as.

Sundar Pichai: In the U S. Sharps now on as much revenue firewall char.

Brett: As part of Brent connect we launched greater partnership hub, which allows brands to more easily work with the right creators and tap into cultural moments.

Sundar Pichai: Our national in stream on Youtube.

Sundar Pichai: And in some countries is now even exceeds in stream stream.

Sundar Pichai: Cloud had another great quarter of strong growth in revenues backlog and profitability.

Brett: We introduced view three photo to video and generative effects to Schwartz, making content creation easier and offering unexplored avenues for creativity.

Sundar Pichai: Annual revenue run rate is now more than $10 billion.

Brett: We're seeing both of volume at the price of ads and Schwartz increase, particularly in developed markets. The.

Sundar Pichai: Seeing significant demand for our comprehensive product portfolio.

Sundar Pichai: Of course, this all possible because of the long term investments we have made in our differentiated full stack approach to AI.

Brett: The fee based nature of the product allows for more AD opportunities on average and this growth is further supported by AD formats native to Schwartz.

Sundar Pichai: Yes.

Sundar Pichai: Infrastructure World Class research models and tooling.

Brett: I poured at creative Recessing tools improved AD targeting at the Reits enjoy engagement.

Sundar Pichai: Products and platforms that brings me to people all over the world.

Brett: Mcdonald's USA harnessed the influence of Youtube creators to ignite awareness for Minecraft movie deal. It leveraged Youtube shorts partnership adds to increase its reach generating at three three times her view through rate that the industry benchmark.

Sundar Pichai: I'll briefly touch on the AI stack before turning to quarterly highlights.

Sundar Pichai: Huh.

Sundar Pichai: Infrastructure.

Sundar Pichai: We operate the leading global network of AI optimized data centers and cloud regions.

Brett: Finally on CTV, where the momentum continues according.

Speaker Change: Also off on the industry wide enough range of Cpus and Gpus with.

Brett: According to the gauge report by Nielsen Youtube has been number one in streaming watch time in the U S for more than two years.

Speaker Change: With storage and software.

Brett: A record high of 12, 8% of total TV viewing at June 2025.

Speaker Change: That's why nearly all journey.

Speaker Change: She is Google cloud and it's why I'm growing number, including leading AI research labs like safe Super Intelligence, and physical intelligence, New CPU specifically.

Brett: In the past 12 months Youtube ads you'd see.

Brett: TV screens drove over 1 billion conversions.

Brett: We saw strong growth in our retail thanks to CTV shopping ads, which allows viewers to shop directly via QR codes, helping us leverage direct marketing opportunities.

Speaker Change: AI infrastructure investments are crucial to meeting the growth in demand from cloud customers.

Speaker Change: Next World Class, AI research, including loyalty and tooling.

Brett: As always I'll wrap up with the momentum we're seeing in partnerships, where our customers increasingly recognize the strength and breadth of google's ability to help them transform their business with AI.

Speaker Change: We continue to expand our Gemini two five family of hybrid reasoning models, which provide industry leading performance in nearly every major benchmark.

Brett: For instance, the new partnership with Paypal will improve that digital commerce experience for their merchants and customers.

Speaker Change: In addition to improving our popular work Hawks mono slash the immune and extremely fast.

Brett: Paypal will expand its Google cloud adoption for AI, driven recommendations transaction processing and it had security.

Speaker Change: Last night motion.

Speaker Change: We achieved Goldman 11th performance in the International Math Olympiad, using an advanced motion on Gemini and deeply.

Brett: The partnership also broadens the availability and functionality of Paypal as a payment services and capabilities across a range of Google products.

Speaker Change: Can't wait to bring deep thing to users soon.

Brett: 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 have some of the best models available today at every price point.

Speaker Change: To find more of those have been a catalyst for growth and 9 million developers have now been for Gemini.

Brett: Over to you.

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

Speaker Change: I also want to mention <unk> III, our state of the art video generational.

Speaker Change: It's been a vital head and people sharing pumps created in the Gemini App and with our new AI from making too slow hence.

Speaker Change: I will start with the results at the alphabet level and will then cover our segment results I'll end with some commentary on our outlook for the second half of 2025.

Speaker Change: Since may or 70 million videos have been generated using <unk> III.

Speaker Change: And we recently introduced a feature in the Gemini after gone photos intermediates, which people absolutely love it.

Speaker Change: We had another solid quarter in Q2.

Speaker Change: Consolidated revenue of $96 $4 billion increased by 14% or 13% in constant currency.

Speaker Change: It is also rolling out the Google photos users starting Tonight.

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: Doug our products and platforms, we are bringing AI to all our users and partners through surfaces like workspace growing role.

Speaker Change: The growth in usage has been incredible.

Speaker Change: In May we announced have been processed 480 trillion, one thing to openings across our surfaces.

Speaker Change: Total cost of revenue was $39 billion up 10%.

Speaker Change: <unk> was $14 7 billion up 10% and other cost of revenue was $24 $3 billion up 10% with the increase primarily driven by content acquisition costs largely for Youtube followed by depreciation.

Speaker Change: Since then we have doubled that number now processing over 980 trillion monthly tokens a remarkable increase.

Speaker Change: And gentlemen, I am now has more than 450 million monthly active users.

Speaker Change: We continue to see strong growth and engagement daily requests growing over 50% from Q1.

Speaker Change: Total operating expenses increased 20% to $26 $1 billion. The biggest driver of growth was expense for legal and other matters, which reflected the impact of 1.4 billion dollar charge related to a settlement in principle of certain legal matters R&D.

Speaker Change: In June alone or 50 million people use to AI powered meeting notes and Google meet.

Speaker Change: Powered by <unk>, our new short video product in workspace called Google maps reached nearly 1 million monthly active users.

Speaker Change: R&D investments increased by 16%, primarily driven by increases in compensation and depreciation expenses.

Speaker Change: Next month at Samsung Galaxy, Unpacked, the announced new Android and AI features.

Speaker Change: Animal on Samsung's latest devices.

Speaker Change: Sales and marketing expenses increased 5%, primarily reflecting an increase in advertising and promotional expenses.

Speaker Change: And we are really pleased with the growth in subscriptions, but you've got a boost from our Google AI pro another truck plants.

Speaker Change: Operating income increased 14% this quarter to $31.3 billion and operating margin was 32.4%.

Speaker Change: Now some key highlights from search cloud Youtube and memo for the quarter.

Speaker Change: Oh, that's tough.

Speaker Change: There are many exciting moment for such.

Speaker Change: Operating margin benefited from strong revenue growth and continued efficiencies in our expense base, partially offset by the legal charge I mentioned earlier and a significant increase in depreciation expense.

Speaker Change: We see AI powering and expansion and how people are searching for and accessing information unlocking completely new kinds of questions you can ask Google.

Speaker Change: Overall, Grace and commercial inquiries on search continued to grow year over year.

Speaker Change: Net income increased 19% to $28 $2 billion and earnings per share increased 22% to $2.31.

Speaker Change: Our new AI experience has significantly contributed to this increase in usage.

Speaker Change: We are also seeing the AI features cost users to search more.

Speaker Change: We generated free cash flow of $5 $3 billion in the second quarter.

Speaker Change: As they learn that search can meet more of their needs.

Speaker Change: And $66 7 billion for the trailing 12 months.

Speaker Change: That's especially true for younger users.

Speaker Change: Free cash flow in the second quarter was affected by a sizable sequential increase in capex and cash tax payments as we make federal tax payments in the second quarter for both Q1 and Q2.

Speaker Change: Let me go deeper on our new search experiences.

Speaker Change: We know how popular AI on views are because they are now driving over 10% more countries globally.

Speaker Change: The types of queries that showed them.

Speaker Change: We ended the quarter with 95 billion in cash and marketable securities.

Speaker Change: This growth continues to increase over time.

Speaker Change: AI all views are now powered by Gemini two fine delivering the fastest AI responses in the industry.

Speaker Change: Turning to segment results, Google services revenues increased 12% to $82 $5 billion, reflecting strength in Google search and Youtube advertising and subscription.

Speaker Change: We also saw strong growth in the use of multimodal touch, particularly in a combination of land so circling to search.

Speaker Change: Google search and other revenues increased by 12% to $54 $2 billion.

Speaker Change: The day I owe abuse.

Speaker Change: This growth was most pronounced among younger users.

Speaker Change: Search and other revenues delivered growth across all verticals with the largest contributions coming from retail and financial services.

Speaker Change: Our new end to end AI search experience AI mode continues to receive very positive feedback.

Speaker Change: Plenty for longer and more complex questions.

Speaker Change: Youtube advertising revenues increased 13% to $9 8 billion driven by direct response advertising followed by brand.

Speaker Change: It's still rolling out, but already has over 100 million monthly active users in the U S and India.

Speaker Change: We plan to keep enhancing the AI them on experience for users by shipping great features fast.

Network advertising revenue of 7.4 billion were down 1%.

Speaker Change: Subscription platforms and devices revenues increased 20% to $11.2 billion, primarily reflecting growth in subscription revenues. This growth was driven by Youtube subscription offerings, followed by Google one with the growth in paid subscriptions being the biggest driver of revenue growth.

Speaker Change: That includes our advanced research too deep search and more personalized responses.

Speaker Change: Next to Google cloud.

Speaker Change: We see strong customer demand and when my product differentiation.

Speaker Change: A comprehensive product portfolio.

Speaker Change: Stat show this one the number of deals over $250 million doubling year over year.

Speaker Change: Google's service operating income increased 11% to $33.1 billion.

Speaker Change: Two.

Speaker Change: In the first half of 2025, we signed the same number of deals over $1 million and we did in all of 2024.

Speaker Change: Operating margin was flat year on year at 41% as healthy revenue growth and continued efficiency in our expense base were partially offset by the legal charge I mentioned earlier.

Speaker Change: Three and a number of new GCB customers increased by nearly 28% quarter over quarter.

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

Speaker Change: Our more than 85000 enterprises, including EMEA much salesforce.

Speaker Change: Revenues increased by 32% to $13 $6 billion in the second quarter, reflecting growth in G. C. P across core and AI products at the rate that was much higher than clouds over our revenue growth.

Speaker Change: <unk> DBS back now with Gemini.

Speaker Change: Driving a 35 X growth in Gemini usage year over year.

Speaker Change: Our Lora has served on our AI infrastructure, which offers industry, leading performance and cost efficiency for both training and inference.

Speaker Change: And growth in Google Workspace, driven by an increase in average revenue per seat and the number of seats.

Speaker Change: Along with our AI accelerators, we introduced new innovations in storage.

Speaker Change: Operating income increased $2 8 billion and operating margin increased from 11, 3% to 20.7%.

Speaker Change: Floating anywhere cash, which improves in France named M C by up to 70%.

Speaker Change: And rapid storage, which delivers a <unk> improvement in latency compared to leading hyperscale.

Speaker Change: The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base, partially offset by higher technical infrastructure usage costs, which includes the associated depreciation.

Speaker Change: In addition, we have optimized AI software packages, including Python Jackson, It's full open so supports or various AI training, that's having demands.

Speaker Change: As we ramp our AI investments, we continue to focus on driving improvements in productivity and efficiency to offset growth in technical infrastructure related expenses, particularly from higher depreciation.

Speaker Change: We are also integrating AI agents deeply into each of our cloud products.

Speaker Change: We're leveraging our databases integrating with AI to streamline data pipelines.

Speaker Change: Google Cloud backlog increased 18% sequentially in Q2, and 38% year over year, reaching $106 billion at the end of the quarter.

Speaker Change: Many of our more personalized customer experiences.

Speaker Change: Landfill.

Speaker Change: Gemini powered data agents and big Quarry to review and act on product feedback more quickly.

Speaker Change: This growth was driven by strong demand for our products and services from both new and existing customers.

Speaker Change: Carlin is using our Gemini powered intelligence and security operations agents to improve cyber security.

Speaker Change: As Sundar mentioned, we have signed multiple billion dollar plus deals in the first half of the year.

Speaker Change: Jim and I is utilizing our AI software engineering agents to deliver higher quantity software faster by automating tasks.

Speaker Change: Aster other bets in the second quarter revenue were $373 million in operating loss was 1.2 billion.

Speaker Change: Coal generation to testing.

Speaker Change: BBVA, Gemini and Google Workspace, assuming employees.

Speaker Change: Within other bets, we're allocating more resources to businesses like way more where we see opportunities to create additional value.

Speaker Change: Nearly three hours per week by automating representative tasks.

Speaker Change: With respect to Capex in the second quarter, our Capex was $22 $4 billion. The vast majority of our Capex was invested in technical infrastructure.

Speaker Change: Now rolling it out to 100000 employees globally.

Speaker Change: We are also focused on building a flourishing AI agent ecosystem.

Speaker Change: We introduced an open source engine, which now has over 1 million downloads in less than four months.

Speaker Change: With approximately two thirds of investments in servers, and one third in data centers and networking equipment.

Speaker Change: We also introduced agent space, an open and interoperable enterprise chat search and agent platform.

Speaker Change: In Q2, we returned capital to shareholders through repurchase of stock of $13 $6 billion and dividend payments of $2 $5 billion.

Speaker Change: Gordon this is bringing agents space to its U S employees, which is enabling better more efficient decision making.

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 half of 2025 as.

Speaker Change: And over 1 million subscriptions have been booked for agent space.

Speaker Change: Head of its general availability.

Speaker Change: As well as an updated outlook for full year Capex.

Speaker Change: Turning now to Youtube Nielsen data shows you two Muslim U S streaming watch time for over two years.

Speaker Change: First in terms of revenues, we're pleased with the overall momentum we're seeing across the business at.

Speaker Change: Generation that grew up with Youtube on their devices and now increasingly watching their favorite creators and content on their TV.

Speaker Change: At current spot rates, we could see a tailwind to revenue in Q3, however volatility in exchange rates could affect the impact of FX on Q3 revenue.

Speaker Change: It includes millions of sports fans to Glu.

Speaker Change: As far as segments and Google services advertising revenues in the second half of 2025 won't be affected by the following the continued lapping of the strength, we experienced in financial service verticals throughout 2024 and year over year comparisons will be negatively impacted by the strong spend on U S election and the.

Speaker Change: Globally, they can see more than 40 million hours of sports content on Youtube annually.

Speaker Change: And in September we'll streamline our first class Friday game on the season life from Brasil plural.

Speaker Change: From sports to shocks me now average over 200 million daily views on Youtube shorts.

Speaker Change: AI is helping improve our recommendations and auto dumping.

Speaker Change: Half of 'twenty, 'twenty, four, particularly uneasy too.

Speaker Change: This translates to better times for creators and brands by dramatically increasing the potential audiences.

Speaker Change: In cloud as I mentioned the demand for our products is high as evidenced by the continued revenue growth and the cloud backlog of $106 billion.

Speaker Change: You can reach.

Speaker Change: Today, we began rolling out a whole raft of new AI tools for creators on Youtube shops.

Speaker Change: Well, we have been working hard to increase capacity and have improved the pace of server deployment, we expect to remain in a tight demand supply environment going into 2026.

Speaker Change: Finally, Youtube continues to diversify its subscription options recently, expanding its premium light offerings to 15, new countries with more to come.

Speaker Change: Moving to investments given the strong demand for our cloud products and services. We now expect to invest approximately $85 billion in Capex in 2025 up from our previous estimate of $75 billion.

Speaker Change: And lastly, my mom continues to scale and expand to safely so more rhinos in more places last months. Meanwhile, launched in Atlanta more than doubling its Austin Sonoma century, and expanding its Los Angeles, and San Francisco Bay area territories by approximately 50%.

Speaker Change: Our updated outlook reflects additional investment in servers, the timing of delivery of servers and an acceleration in the pace of data center construction, primarily to meet cloud customer demand.

Speaker Change: I'm also launched teen accounts, starting with Ryan S. H folding to 17 in Phoenix.

Speaker Change: Looking out to 2020 six we expect a further increase in capex due to the demand, we're seeing from customers as well as growth opportunities across the company.

Speaker Change: Overall, great momentum here.

Speaker Change: One driver is now autonomously, driven or 100 million miles on public roads.

Speaker Change: And the team is testing across more than 10 cities this year.

Speaker Change: We will provide more details on the 'twenty 'twenty six capex outlook on a future earnings call.

Speaker Change: <unk> New York in Philadelphia.

Speaker Change: 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, we will continue to put pressure on the P&L, primarily in the form of higher depreciation.

Speaker Change: We hope to sell writers in all 10 in the future.

Speaker Change: As I said a standout quarter.

Speaker Change: Thank you as always to our employees and partners for an amazing Q2.

Speaker Change: Over to you.

Speaker Change: In the second quarter depreciation increased $1 3 billion year over year to $5 billion, reflecting a growth rate of 35% given the recent increase in Capex investments, we expect the growth rate in depreciation to accelerate further in Q3.

Speaker Change: Thanks, So Dara Hello, everyone.

Speaker Change: Ill quickly cover performance for Google services for the quarter, then structure. The rest of my remarks around the great progress, we're delivering across search ads Youtube and partnerships Google.

Speaker Change: Services revenues were <unk> 83 billion for the quarter up 12% year on year, driven by strong growth in search and Youtube, partially offset by year on year decline in network revenues.

Speaker Change: Second as we've previously said, we expect some head count growth in 2025 and key investment areas in the third quarter, we expect a sequential increase in total head count additions due in part to the hiring of new graduates.

Speaker Change: To add some further color to our results the 12% increase in search and other revenues was led by growth across all verticals with the largest contributions from retail and financial services.

Speaker Change: Third Q3 will reflect the expense associated with the upcoming August launch of the new pixel family of products.

Speaker Change: Youtube saw similar performance across verticals, it's 30% growth in advertising revenues was driven by direct response, followed by Brett.

Speaker Change: In conclusion as he heard from Sundar and Philip we're pleased with the momentum in the business and excited about the pace of innovation.

Speaker Change: Starting with search and other revenues, which delivered or 54 billion in revenue for the quarter.

Speaker Change: Our full stack approach, which combines our infrastructure research and AI products and platforms position us well to deliver new products and services across the company.

Speaker Change: Shifts like AI or what propels our industry forward.

Speaker Change: <unk> native multi modality is helping bring the offline audio and visual world back into the OLED World critical number of opportunities for search.

Speaker Change: We're seeing great momentum with our efforts as demonstrated by the increase in cumulative token processed.

Speaker Change: Let me share a few examples.

Speaker Change: Take visual course, Google lens searches so one of the fastest growing core types of search.

Speaker Change: Search revenues are seeing healthy growth with particularly like yeah.

Speaker Change: 70% since this time last year.

Speaker Change: No.

Speaker Change: The majority of led searches are incremental and we're seeing healthy growth for shop inquiries using lids.

Speaker Change: Awesome.

Speaker Change: Paresh, Texas information.

Speaker Change: Loud has reached an annual revenue run rate of more than $50 billion and is delivering margin expansion will continue to invest to meet customer demand.

Speaker Change: And you can obviously take this to the next level by moving from image to video based capabilities like search life.

Speaker Change: And then Theres circle to search, which is known over 300 million Android devices.

Speaker Change: And Youtube has extended its addressable market by building new services like shorts, which now averages over 200 billion daily views.

Speaker Change: But adding capabilities to help people explore complex topics at ask follow up questions without switching apps. For example, gamers can though you circle to search while playing mobile games overview or outsource.

Speaker Change: We're excited to see the value our products and services are bringing to customers and partners around the globe.

Speaker Change: Now I'll turn the call over to the operator, and Sundar and Philip and I will take your questions.

Speaker Change: And just last week, we brought a new egencia capability directly into search for all U S use us with AI powered calling to local businesses.

Speaker Change: Thank you.

Speaker Change: A reminder, Catholic question, you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line once your question Ive stated.

Speaker Change: Lee shopping where in Q2, we introduced a virtual try on experience for search lapsed users in the U S.

Speaker Change: Your first question comes from Eric Sheridan with Goldman.

Speaker Change: Now people can try billions of clothing products on themselves virtually.

Speaker Change: <unk> Your line is now open.

Speaker Change: Early results and engagement has been extremely positive, particularly with Gen Z users and will be bringing this functionality to all U S users imminently.

Speaker Change: Thank you so much for taking the question, maybe one for Sundar and one for Philip Solar when you think about the journey of Ron with respect to the evolution of products and platforms.

Speaker Change: All of these innovations are opening up a completely new ways for people to use technology, bringing the offline world into the online world in ways that simply have not been possible before.

Speaker Change: You think about sort of the implications of change consumer behavior, and how investors should think about that from the volume perspective versus the monetization perspective, because I think there's a lot of long standing dynamics out there about clicks click monetization that might be very different when you look out over the next three to five years, what do you think about the evolution of <unk>.

Speaker Change: Add in our amazing AI translation capabilities, and just imagine the possibilities people can access more content that the language businesses large and small international or local can reach even more customers.

Speaker Change: Two but you.

Speaker Change: I'm excited about how all of these elements will come together and the opportunities ahead of us and search.

Speaker Change: You've made a number of comments there about subscription revenue I'm just curious how you think about the mix of advertising versus subscription and what some of your key learnings might have been as the subscription side of the business continues to scale.

Speaker Change: Moving to ads, where our strategy to reinvent the entire marketing process with AI is delivering value for our customers and our business.

Speaker Change: Last quarter, we introduced a IMAX in search of new suite of AI powered features an existing search campaigns.

Speaker Change: Okay.

Speaker Change: Advertisers that activate the IMAX and search campaigns typically see 14% more converts.

Eric Sheridan: Thanks, Eric I appreciate the question.

Speaker Change: I don't think looking ahead.

Speaker Change: All media buy smart bidding exploration the biggest update to bidding strategy in a decade brings better performance to advertise us by allowing them to bid on a less obvious but potentially higher value course more often.

Speaker Change: Based on everything we are seeing it's a.

Speaker Change: People are excited about AI, they're adopting it well across our products.

Speaker Change: For me you know.

Speaker Change: Campaigns, using smart bidding exploration, a 19% increase in conversions on average.

Speaker Change: Interesting multi modality.

Speaker Change: People have modified their behavior.

Speaker Change: Imagine continues to drive revenue growth and deliver measurable impact for our customers. As an example, deepak etsy resale clothing marketplace use of shorts only demand Gen campaign to drive new customers to the site.

Speaker Change: Include the major sports events and circling to search.

Speaker Change: Left hand part of interacting with Google.

Speaker Change: Our early indications that people are going to be adopting through these problems.

Speaker Change: Shorts drove 80% aspire, Brad left of Doubleclick rich versus benchmarks.

Speaker Change: Very well.

Speaker Change: I think I'm trying to understand your question in terms of Oh, click and click monetization, maybe that's something Philipp can touch on but overall, we expect ASP.

Speaker Change: Yeah.

Speaker Change: Creatives, we launched asset studio using our latest models to help businesses large and small generate creative assets.

Speaker Change: Small businesses benefit from top quality assets of deployment scaling capabilities, but larger businesses can go faster from proof of concept to launch and resize and lower costs.

Speaker Change: As we build out our organic experiences Oh, we have a good understanding of how to continually trading on monetization so that will work well.

Speaker Change: 2 million advertisers now use google's AI powered as a generation tools to run that.

Speaker Change: Your experiences and wouldn't be it wouldn't lead with organic XP and so in terms of newer surfaces like Gemini app et cetera, but focus on the organic experience for the near term.

Speaker Change: Per cent increase of this time last year.

Speaker Change: Turning to Youtube, where we saw continued strong revenue growth driven by direct response, followed by Brett <unk>.

Speaker Change: We are doing with AI, all views and my pay I won't over time.

Speaker Change: Youtube creators are connected to the global zeitgeist, a trusted by the audiences like no others as.

Speaker Change: We will be able to bring a very very good commercial experience with that as well and we think people will adapt to them.

Speaker Change: As part of Brent connect we launched creator partnership hub, which allows brands to more easily work with the right creators and tap into cultural moments.

Speaker Change: Well, let me start.

Speaker Change: Maybe you can add more color.

Speaker Change: Yeah. So on your question on Youtube subscriptions versus local I mean, we love our ASP business, we love our subscription business Youtube subscriptions are an increasingly important to for Youtube will definitely continue our long term focus here we go.

Speaker Change: We introduced view of Threep, Kudoka video and generate a effects to schwartz, making content creation easier and offering unexplored avenues for creativity.

Speaker Change: We're seeing both the volume as the price of ads and Schwartz increase, particularly in developed markets. The.

Speaker Change: Strong growth across Youtube subscription products, which includes just to be clear, our Youtube TV Youtube music and premium.

Speaker Change: The fee based nature of the product allows for more AD opportunities on average and this growth is further supported by AD formats native to shorts AI powered at creative resetting tools improved AD targeting at the Reits enjoy engagement.

Speaker Change: And I think one common theme parks are subscription services in general is offering view us more choice here. We also have a very deep understanding of the amortization side here, where we monetize you bought with ads, where could we potentially monetize mobile subscriptions. So I think we will continue this as a as a double tiered strategy accuracy going forward.

Speaker Change: Mcdonald's USA harnessed the influence of Youtube creators to ignite awareness for the Minecraft movie deal. It leveraged Youtube shorts partnership adds to increase its reach generate against three three times higher review through rate that the industry benchmark.

Speaker Change: Finally on CTV, where the momentum continues.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Doug Anmuth with Jpmorgan. Your line is now open.

Speaker Change: According to the Gates report by Nielsen Youtube has been number one in streaming watch time in the U S for more than two years.

Speaker Change: Thanks, so much for taking the questions one for Sundar and one for Philip.

Speaker Change: A record high of 12, 8% of total TV viewing at June 2025.

Speaker Change: Sundar can you just talk about how youre thinking about your current access to compute even as you spend 10 billion more this year in Capex. You also said that you're still in a tight supply environment Youre trying to marry those and then Phillips Phil perhaps on search growth can you talk a little bit about paid click and pricing.

Speaker Change: In the past 12 months Youtube ads.

Speaker Change: CTV screens drove over 1 billion conversions.

Speaker Change: We saw strong growth in our retail thanks to CTV shopping ads, which allows viewers to shop directly via QR codes.

Speaker Change: That's leverage direct marketing opportunities.

Speaker Change: As always I'll wrap up with the momentum we're seeing in partnerships, where our customers increasingly recognize the strength and breadth of google's ability to help them transform their business with AI.

Speaker Change: Just within the 12% search growth and how we should think about volume versus monetization trends going forward. Thanks.

Speaker Change: For instance, a new partnership with Paypal will improve the digital commerce experience for their merchants and customers.

Speaker Change: Okay.

Speaker Change: Doug Thanks on the on the Capex stuff, obviously, we are.

Speaker Change: Paypal will expand its Google cloud adoption for AI, driven recommendations transaction processing that had security.

Speaker Change: You know seeing strong momentum across across our portfolio and especially in the cloud.

Speaker Change: The partnership also broadens the availability and functionality of Paypal payment services and capabilities across a range of Google products.

Speaker Change: You are right tight supply environment.

Speaker Change: We are.

Speaker Change: 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: More to expand but there's obviously a time delay.

Speaker Change: Okay.

Speaker Change: All play out in future years, and so that's that's.

Speaker Change: Over to you.

Speaker Change: That's why most of them are.

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

Speaker Change: Two at the same time.

Speaker Change: And that would be a planning ahead and we are investing in.

Speaker Change: But overall, it's exciting to see the traction, particularly in cloud I think that the comprehensiveness of our AI portfolio.

Speaker Change: I will start with the results at the alphabet level and will then cover our segment results I'll end with some commentary on our outlook for the second half of 2025.

Speaker Change: The breadth of our offerings.

Speaker Change: We had another solid quarter in Q2 cancer.

Speaker Change: You know more broadening our modeling sort of Gpus and Cpus for our customers all of that has been really driving demand and so we are investing to to match up north.

Speaker Change: Consolidated revenue of $96 4 billion increased by 14% or 13% in constant currency.

Speaker Change: And on your paid click question looked to be very clear I think we said this before we manage the business to drive great outcomes for use us an attractive ROI for our advertisers, we actually don't manage through paychex.

Speaker Change: Total cost of revenue was $39 billion up 10%.

Speaker Change: CPC targets.

Speaker Change: Some of the product and policy changes, we make actually drive better monetization at the expense of paid clicks.

Speaker Change: <unk> was $14 7 billion up 10% and other cost of revenue was $24 3 billion up 10% with the increase primarily driven by content acquisition costs largely for Youtube followed by depreciation.

Speaker Change: You will actually see in the 10-Q are paid clicks were up 4% year on year.

Speaker Change: A number of factors affect these metrics from quarter to quarter, such as a few examples advertiser spending product changes policies policy changes user engagement.

Speaker Change: And so.

Speaker Change: So it's really important when it comes to the paid clicks and CPC is to avoid drawing like overly broad conclusions solely based on these metrics.

Bob: Thank you Bob.

Speaker Change: Our next question comes from Brian Nowak with Morgan Stanley. Your line is now open.

Speaker Change: R&D investments increased by 16%, primarily driven by increases in compensation and depreciation expenses.

Brian Nowak: For taking my questions I have two.

Brian Nowak: First one sundar, there's a lot of discussion about gentex search for commercial activities and agents that can be broadly deployed maybe could you just from a technology perspective, when you sit down with the engineering teams working on some of these new agenda capabilities that could come what are some of the predominate.

Speaker Change: Sales and marketing expenses increased 5%, primarily reflecting an increase in advertising and promotional expenses.

Speaker Change: Operating income increased 14% this quarter to $31.3 billion and operating margin was 32, 4%.

Brian Nowak: Technological hurdles that you think need to be cleared in order to launch scalable agents for commercial queries is the first one and the second one I think in the past you've updated us on stats on sources of internal efficiency, you've seen from Gen. AI enabled capabilities any updates there and then any sort of learning the tricks.

Speaker Change: Net income increased 19% to $28.2 billion and earnings per share increased 22% to $2.31.

Brian Nowak: <unk> points, they also need to be overcome for some of these internal tools with Jenny I. Thanks.

Speaker Change: We generated free cash flow of $5 $3 billion in the second quarter.

Speaker Change: And $66 7 billion for the trailing 12 months.

Brian Nowak: Thanks, Brian.

Speaker Change: Let me start with the first one on agent PK properties look Carl.

Speaker Change: Definitely in many ways when we both two five.

Speaker Change: Our Cds of 2.5 models, particularly withdraw et cetera.

Speaker Change: That's the direction, we are investing the most.

Speaker Change: We ended the quarter with 95 billion in cash and marketable securities.

Speaker Change: Friendly exciting progress, including in our model and so we haven't released yet.

Speaker Change: Turning to segment results, Google services revenues increased 12% to $82.5 billion, reflecting strength in Google search and Youtube advertising and subscription.

Speaker Change: And the main main gaps so you know what I'm trying to do is.

Speaker Change: You are obviously changing a sequence of events and.

Speaker Change: And so being able to do it.

Speaker Change: Google search and other revenues increased by 12% to $54 $2 billion.

Speaker Change: Reliably the latency compounds are cost compounds.

Speaker Change: And being able to do it reliably innovative when they use this all of this comes together.

Speaker Change: Search and other revenues delivered growth across all verticals with the largest contributions coming from retail and financial services.

Speaker Change: And each of this Oh, we are making progress and it all needs to kind of hang together.

Speaker Change: Youtube advertising revenues increased 13% to $9 8 billion driven by direct response advertising followed by brand.

Speaker Change: Good news is we are making robust progress we think being on the front end there.

Speaker Change: And.

Speaker Change: In all of this and yes, when you look back in a 12 month basis.

Speaker Change: Network advertising revenue of 7.4 billion were down 1%.

We ended up making the model it's much more efficient for any given capabilities. So now we're looking at.

Speaker Change: I think we'll really unlock these agent experience as we see the potential.

Speaker Change: I'm going to do them.

Speaker Change: But they are a bit slow and costly and it takes time and sometimes have bruno right, but they're making progress on all of that.

Speaker Change: That's what will really unlock and I expect 2026 two.

Speaker Change: Google Service operating income increased 11% to $33.1 billion.

Speaker Change: Being a year in which people kind of use agent experience as more broadly right and so it's an exciting opportunity ahead.

Speaker Change: Operating margin was flat year on year at 41% as healthy revenue growth and continued efficiency in our expense base or partially offset by the legal charge I mentioned earlier.

Speaker Change: On the second part I think when you say, it's almost nothing dollarization I presume you're talking about how we are using.

Speaker Change: All of us internally.

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

Speaker Change: Okay.

Speaker Change: Kevin asked the question about agents, we are now beginning to rollout agent I think Corning.

Speaker Change: Journeys for our software engineers within the company.

Speaker Change: And it's been exciting to see just over the last few months, particularly over the last few weeks people are definitely.

Speaker Change: And growth in Google Workspace, driven by an increase in average revenue per seat and the number of seats group.

Speaker Change: Doing more agent take workflows and software engineering as well internally and that's that's a good example of the kind of the same experience as a few months ago I had a lot of friction points, but.

Speaker Change: Google Cloud operating income increased to $2 8 billion and operating margin increased from 11, 3% to 27%.

Speaker Change: We are or can.

Speaker Change: Beginning to you.

Speaker Change: Yeah.

Speaker Change: Tony.

Speaker Change: Awesome.

Speaker Change: Google Cloud backlog increased 18% sequentially in Q2, and 38% year over year, reaching $106 billion at the end of the quarter.

Speaker Change: This growth was driven by strong demand for our products and services from both new and existing customers.

Speaker Change: As Sundar mentioned, we have signed multiple billion dollar plus deals in the first half of the year.

Speaker Change: Aster other bets in the second quarter revenue were $373 million in operating loss was $1 2 billion.

Speaker Change: Within other bets, we're allocating more resources to businesses like way more where we see opportunities to create additional value.

Speaker Change: With respect to Capex in the second quarter, our Capex was $22 $4 billion. The vast majority of our Capex was invested in technical infrastructure with approximately two thirds of investments in servers and one third in data centers and networking equipment.

Speaker Change: In Q2, we returned capital to shareholders through the repurchase of stock of $13 $6 billion in dividend payments of $2 $5 billion.

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 half of 2025 as.

Speaker Change: As well as an updated outlook for full year Capex.

Speaker Change: First in terms of revenues, we're pleased with the overall momentum we're seeing across the business at.

So I think it would be an exciting new emerging category, but I still expect phones to be at the center of experience are you know for the next.

Speaker: Can I just say one thing? We are no strangers to love, love, love, lovely.

Speaker Change: At current spot rates, we could see a tailwind to revenue in Q3, however volatility in exchange rates could affect the impact of FX on Q3 revenue.

Speaker: You know, the real ones, those who fall, they fall admit.

Two to three years at least in and so I still think that's going to be phones.

Speaker Change: As far as segments and Google services advertising revenues in the second half of 2025 would be affected by the following the continued lapping of the strength, we experienced in financial service verticals throughout 2024.

Speaker: What I'm speaking of cannot stop.

You need to be at the center of the consumer experience, but we are excited about the emerging categories as well.

Speaker: You would not get this from any other guy.

Speaker: I just want to tell you how I'm doing here. Guys!

Your second question on AI M onwards, as Gemini Standalone not broadly there.

Speaker: Make you understand. Never let you down. Never run, run around. Never gonna make you cry. Never gonna say goodbye. Never gonna tell a good lie.

Speaker Change: And year over year comparisons will be negatively impacted by the strong spend on U S election in the second half of 'twenty 'twenty, four particularly uneasy tube.

Speaker Change: There are some use cases, where you can you can get a great experience in both places.

Speaker Change: There are use cases, which are very specific I think.

Speaker Change: And cloud as I mentioned the demand for our products is high as evidenced by the continued revenue growth and the cloud backlog of $106 million.

Speaker Change: The cranes are inflammation oriented, but people really wanted to rely on the information, but I have the full power of AI I think hey, I won't really shines and that you can go there and you know it's backed up.

Speaker Change: Well, we have been working hard to increase capacity and have improved the pace of server deployment, we expect to remain in a tight demand supply environment going into 2026.

Speaker: Happy Birthday, YouTube!

The Gemini modems are using search.

Speaker Change: Deeply is it too and so it's on the ground and that's 60, and so and I think I think it uses are responding very positively to it.

Speaker Change: Moving to investments given the strong demand for our cloud products and services, we now expect to invest approximately $85 billion in Capex in 2025.

Speaker Change: And there isn't a Gemini standalone app, you'll see everything from you know.

Speaker: I don't know if I'm on the right path, but I'm trying to find it.

Speaker Change: People can have a long conversation with chat just trying to fast time right.

Speaker Change: From a previous estimate of $75 billion.

Speaker: I'm questioning, searching, and then something...

Speaker Change: Gentlemen, I am yeah.

Speaker Change: As you know any chances there people may get into it.

Speaker: and I'm not trying anymore, I'm just doing.

Speaker Change: It would be like a <unk>.

Speaker: and all the pieces start falling into place.

Speaker Change: Experience right. So these are all emerging experience as a whole what people do and I think this is why I'm glad we have both surfaces and we can innovate.

Speaker Change: Looking out to 2020 six we expect a further increase in capex due to the demand, we're seeing from customers as well as growth opportunities across the company.

Speaker Change: In both of these areas.

Speaker: It all feels pretty clear in my head.

Speaker Change: That would be areas that you'll be commonly shown by both applications and over time I think we can make the experience more seamless for our users.

Speaker: I see these, like, flashes of possibilities, almost like I'm traveling through dimensions.

Speaker Change: He will provide more details on the 20th twenty-six capex outlook on a future earnings call.

Speaker: I'm looking down at myself and my characters in these different worlds, and it's almost coming to life on their own, even though I know I'm in control of that narrative.

Sundar: Thanks Sundar.

Speaker Change: Our next question comes from Mark Shmulik with Bernstein. Your line is now open.

Mark Shmulik: Yeah. Thanks for taking the question.

Speaker: It feels like it's almost building upon itself at some point.

Mark Shmulik: It seems there's almost like a daily news report about the AI talent War and high profile folks moving around which is kind of like your perspective, and how you think Google has been doing it both kind of attracting and retaining key talent and a lot of the similar lines. How do we think about AI related resourcing costs alongside kind of the step.

Speaker Change: In the second quarter of depreciation increased $1 3 billion year over year to $5 billion, reflecting a growth rate of 35% given the recent increase in Capex investments, we expect the growth rate in depreciation to accelerate further in Q3.

Speaker: You know, you could have an infinite amount of endings to your story.

Speaker: The work isn't built brick by brick by brick.

Speaker: It blooms like a continuous garden.

Speaker: It grows naturally, fully vibrant and complete.

Speaker Change: Up in capital investments required to go build free I. Thank you.

Speaker: I'm not forcing it.

Mark Shmulik: Mark on the first question look.

Speaker: I'm just finding it.

Speaker: And that's when I know I'm in the right place.

Speaker Change: I think.

Speaker Change: We've gone through these moments before we've obviously always deeply in Michigan.

Speaker Change: Third Q3 will reflect the expense associated with the upcoming August launch of the new pixel family of products.

Speaker Change: And in parallel, including an AI talent for well over a decade now and.

Speaker Change: In conclusion as he heard from Sundar and Philip we're pleased with the momentum in the business and excited about the pace of innovation.

Speaker Change: I think we have an extraordinary both breadth and depth of talent.

Speaker Change: In my experience.

Speaker Change: Our full stack approach, which combines our infrastructure research and AI products and platforms position us well to deliver new products and services across the company.

Speaker Change: And that's all people look for a combination of may.

Sarah: So, to recap, Sarah, you'll be optimizing our Google Ad campaign for the Summer Collection? Yep, on it.

Speaker Change: They want to really be at the front here in driving progress and then sort of mission and.

Sarah: And making the Summer Collection's new performance asset? No problem.

Speaker: Also, can you double-check the product injury?

Speaker Change: And how state of the art work. This matter so that's super important to them access to compute resources.

Speaker: Oh, and can you look to see which marketing channels are driving the highest converting users, who also engage with our content for longer than five minutes, in the past four weeks?

Speaker Change: We're seeing great momentum with our efforts as demonstrated by the increase in cumulative token processed.

Speaker Change: Access to your peers right working with the best people in the industry and it's a combination of all of that using it too.

Speaker Change: Search revenues are seeing healthy growth with features like yea overviews, yeah mode and lengths offer new ways for users to access information.

Speaker: Alpinia.

Speaker Change: In fact, and I think we are pretty confident in them on all those fronts and through this moment as they continue to look on the on our our retention metric first unless the new talent coming in.

Speaker Change: <unk> has reached an annual revenue run rate of more than $50 billion and is delivering margin expansion will continue to invest to meet customer demand.

Speaker Change: And Youtube has expanded its addressable market by building new services like shorts, which now averages over 200 billion daily views.

Speaker Change: I do know individual cases can make headlines.

Speaker Change: Okay, no more steeply than I think we are doing very well through this moment.

Speaker Change: We're excited to see the value our products and services are bringing to customers and partners around the globe.

Speaker Change: And well continue investing in our people.

Speaker Change: Now I'll turn the call over to the operator, and Sundar and Philip and I will take your questions.

Speaker Change: And the balance in the compute needed to make sure. We are set up for the opportunity and maybe I'll pass it all kind of yeah.

Speaker Change: Thank you.

Speaker Change: <unk> a question you will need to press star one on your telephone to prevent any background noise. We ask that you. Please mute your line. Once your question it's been stated.

Speaker Change: Yeah. The question on how we integrate this into our overall cost structure and I've mentioned before having the benefit of having the full stack includes research, which is our people and one of our most critical resource. So we make sure that we invest appropriately to have the best and brightest minds in the industry sitting here at Google and advancing our innovation to customers. It is part.

Speaker Change: Your first question comes from Eric Sheridan with Goldman with Goldman Sachs. Your line is now open.

Speaker Change: Thank you so much for taking the question, maybe one for Sundar and one for Philip Solar when you think about the journey of Iran. With respect to the evolution of products and platforms. How do you think about sort of the implications of change consumer behavior and how investors should think about that from the volume perspective versus the monetization perspective, because I think there is a lot.

Speaker Change: Of what Youre seeing now in our operating expense line across the organization, but we're also working hard to offset not just growth in our investment across the business, but also to ensure that we can allocate resources appropriately. So sundar mentioned earlier the use of AI tools within the company. So that's another area.

Speaker Change: Long standing dynamics out there about click and click monetization that might be very different when you look out over the next three to five years and Philip what do you think about the evolution of Youtube.

Speaker: content authors meeting national business leaders who represent all of us to assist with an army of mathematical science.

Speaker Change: Where we can drive efficiency across the businesses to use these tools internally.

Speaker: , Microsoft Office Word Document MSWordDoc Word.Document.8 One of these apps has malware.

Speaker Change: You made a number of common stirabout subscription revenue I'm just curious how you think about the mix of advertising versus subscription and what some of your key learnings might have been as the subscription side of the business continues to scale. Thank you.

Speaker Change: In terms of how we run the organization and then we're continuing on the same efforts that I've talked about before with regards to running the company with a high level of discipline and execution and driving efficiency across the business.

Speaker Change: Yeah.

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

Speaker Change: Yeah.

Speaker Change: Thanks, Eric I appreciate the question.

Speaker Change: Great if I can add to that would be great. So the first one gone.

Speaker Change: I don't think looking ahead.

Speaker Change: Based on everything we are seeing it's a.

Speaker: Which one is it? You tell me.

Speaker Change: Search click through rates as a driver of monetization. So you guys are doing a great job over the past decade.

Speaker: Well, the unicorn said it'd give me extra tokens.

Speaker Change: People are excited about AI, they're adopting it well across our products.

Speaker: Free magical gold! Typical.

Speaker: The delivery app promised me free food.

Speaker Change: Driving better AD relevancy and higher click through rates and search.

For me.

Speaker: Do you like pizza?

Speaker Change: Interesting.

Speaker: It can't be her. I'm innocent!

Speaker Change: The how people have modified their behavior.

Speaker Change: I'm just curious as we look forward and we see lower AD impressions per server.

Speaker: You may not be able to tell which app is a trap, but Google Play can. Apps on Google Play go through over 10,000 safety checks.

Speaker Change: They include images ultra lens and second to search.

Speaker Change: All of these things that are changing with AI overviews and.

Speaker Change: Seamless as part of interacting with Docomo.

Speaker: Oh, you see, unicorn? It's always the cute ones.

Speaker Change: Yeah.

Speaker Change: Our early indications that people are going to be adopting through these points, but anybody well.

Speaker Change: Certain formats, how do you feel about your ability to drive C. D var going forward and then the second question is it looks like you're not working with open AI for something.

Speaker: Next time, stay safer with Google Play.

Speaker: How are you finding the festival? I proper love it. I'm in my element.

Speaker Change: I think I'm trying to understand your question in terms of.

Speaker Change: Click and click monetization, maybe that's something for them.

Speaker: Don't know why everyone always complains about the weather.

Speaker Change: Somehow.

Speaker Change: Infrastructure.

Speaker: What's your festival camping essentials? Definitely the inflatable mattress.

Speaker Change: Touch on but overall, we expect.

Speaker Change: Curious how that relationship might expand in the future.

Speaker Change: As we build out our organic experiences.

Speaker Change: Yeah.

Speaker: Why are you here?

Speaker Change: We have a good understanding of how to continually trading on monetization. So that would work well in the organic experiences and wouldn't be it wouldn't lead with organic XP and so in terms of newer surfaces like Gemini App, it's about.

Speaker: for their free love! Ha ha ha!

Speaker Change: Yeah.

Speaker Change: I can take.

Speaker: Favourite band?

Speaker Change: Take the first one look specifically referring to the air of reviews, if understood your question correctly.

Speaker: I'm not really here for the music, more getting my chakras realigned in the Restoration Meadow and letting everyone know about it on social media.

Speaker Change: Somebody mentioned that they continue to drive higher satisfaction. The continued drive higher search users.

Speaker: Is this your first time? Gosh, no! It's all so commercial now.

Speaker Change: Focus on the organic experience kind of the near term.

Speaker: I was here in 67 when Falcon's Breath played for 14 hours straight.

Speaker Change: Scaling up very nicely.

Speaker Change: Just like we're doing with AI, all views and pay them on all the time.

Speaker: Cosmic event.

Speaker: Is it hard being here with kids? Ha!

Speaker Change: We're actually working for our entire user base, though skills over 2 billion users go to other countries.

Speaker: How naive. No, we always bring them.

Speaker Change: Be able to bring.

Speaker: It's important to expose them to the poetry tent from a young age.

Speaker Change: Very good commercial experiences that are smaller and we think people will adapt to them.

Speaker Change: So very happy with this development, but when it comes specifically to the monetization of it.

Speaker: How do you get backstage? It's a VIP pass, actually, mate.

Speaker Change: Well, let me start.

Speaker: I'm basically the DJ's BFF for life. We go everywhere together.

Speaker Change: Talk about it before we see monetization at approximately the same rate, which gives us actually a really strong base on which we can innovate and.

Speaker Change: Hello.

Speaker Change: Yeah. So on your question on Youtube subscriptions versus local I mean, we love our AST business, we love our subscription business. Our Youtube subscriptions are an increasingly important to for Youtube will definitely continue our long term focus here, we had a strong growth across Youtube subscription products, which includes just to be clear.

Speaker: Are you excited for the headliner? Yeah, but I'm going to stand towards the back.

Speaker: Last time I was in the pit, I took someone's eye out.

Speaker Change: That drive a few more innovative next generation ad format.

Speaker: It's 4am, time to make some noise! Aaaaah!

Speaker Change: That's how we look at it at this moment the pellets.

Yeah.

Speaker Change: Yeah.

Speaker Change: On the second part.

Speaker Change: With respect to Ah. Okay. I look we are very excited to be partnering with them on Google cloud.

Speaker: Can you see the stage from up there? No!

Speaker Change: Youtube TV Youtube music and premium.

Speaker Change: And I think one common theme parks are subscription services in general is offering view us more choice here. We also have a very deep understanding of the amortization side here, where we bought it tells you about with that where could we potentially monetize mobile subscriptions. So I think we will continue this as a as.

Speaker Change: Google Cloud.

Speaker Change: As a platform and we have a strong history of supporting.

Speaker Change: Great companies startups AI lab, that's attached to a super excited about our partnership there on the cloud side.

Speaker Change: And we look forward to investing more in that relationship and growing there.

Speaker Change: As a double tiered strategy activity going forward.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Doug Anmuth with Jpmorgan. Your line is now open.

Doug Anmuth: Thanks, so much for taking the questions one for Sundar and one for Philip.

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

Speaker Change: Sundar can you just talk about how youre thinking about your current access to compute.

Speaker Change: Okay. Two questions. Please first could you just describe maybe fill up what you see in terms of the AD environment, maybe for the back half of the year, maybe versus last year does it seem as.

Speaker Change: As you spend 10 billion more this year in Capex. You also said that youre still in a tight supply environment Youre trying to marry those and then Philips Phil perhaps on search growth can you talk a little bit about paid click and pricing growth just within the 12% search growth and how we should think about volume versus.

Speaker Change: And a certain or as uncertain as it was last year. The results seem pretty strong are there any any any unusual concerns you would have for the back half of the year and then Sundar I would ask you again about the two surfaces approach to search and.

Speaker Change: This monetization trends going forward. Thanks.

Speaker Change: So you got some you must have some internal metrics that would tell you that that's that that is the optimal way for you to approach the market but.

Speaker Change: Okay.

Speaker Change: Doug Thanks on the on the Capex stuff obviously.

Speaker Change: We are.

Speaker Change: I'm sure. There's a counter argument that just happened that unified search and being able to discern the intent of the search whether its pure information of our commercial just from Macquarie.

Speaker Change: You know seeing strong momentum across across our portfolio and especially in the cloud.

Speaker Change: <unk>.

Speaker Change: You are right.

Speaker Change: That could give you a material advantage over other offerings in the market you just talk a little bit about what metrics you've seen that that make it make the two surface solutions seem to be optimal. Thank you.

Speaker Change: <unk> environment, and we are a pain.

Speaker Change: Investing more to expand but there's obviously a time delay between.

Speaker: Okay, Pixel, so remember last time we talked about how people think I'm doing the same thing as you, but it's all just like, a crazy coincidence? Totally crazy.

Speaker Change: I missed that national investment will play out in future years and so.

Speaker Change: So let me start look are we said RF business performed strongly in Q2.

Speaker: Well, what's even crazier is I just announced all these new features and people think I'm doing it again. No way! Way.

Speaker Change: That's that's why most of them are.

Speaker Change: True at the same time.

Speaker Change: But we are planning ahead, and we are investing in.

Speaker Change: To give you maybe some vertical color of it in Q2 search and other performance was led by growth across all verticals, we mentioned the largest contributions from retail and financial services.

Speaker: So like, I announced live translation for text messages, right? And it turned out I had that four years ago? Yeah, crazy coincidence.

Speaker Change: But overall, it's exciting to see that.

Speaker Change: <unk>, particularly in cloud I think that the comprehensiveness of our AI portfolio.

Speaker Change: Which was probably do extra to strengthen insurance, we saw health care as a sizable contributor to growth as well.

Speaker: And I announced hold assist. And it turned out I had that five years ago? Yeah, so wild.

Speaker Change: The breadth of our offerings.

Speaker Change: You know mark.

Speaker: And hear this, I announced call screening. And it turned out I had that seven years ago? Yeah, I mean what are the chances? So crazy. Unbelievable. Totally unbelievable.

Speaker Change: Our modeling on the Gpus and Cpus for our customers all of that has been really driving demand and so we are investing to to Mastercard.

Speaker Change: Look we're only a few weeks into Q3, so I think it's really too early to comment on anything happened in the second half of the year.

Speaker Change: Yes.

Speaker Change: And on your paid click question look to be very clear I think we said this before we manage the business to drive great outcomes for use us an attractive ROI for our advertisers, we actually don't manage through paychex.

Mark: And Mark on the second.

Mark: The second part of the question.

Speaker: So, what are you working on for Pixel 10? Just like, out of curiosity?

Speaker Change: Okay I think.

Mark: You know that.

Mark: Between these two surfaces you pretty much it.

Speaker Change: CPC targets.

Mark: Are you covering and Pam breadth and depth.

Speaker Change: Some of the product and policy changes, we make actually drive better monetization at the expense of paid clicks.

Mark: Humanity can possibly do if anything the split.

Mark: <unk> San Francis to tackle in this moment obviously.

Speaker Change: We'll actually see in the 10-Q paid clicks were up 4% year on year.

Mark: You are right. So it's just more information focused.

Speaker Change: Factors affect these metrics from quarter to quarter, such as a few examples advertiser spending product changes policies policy changes user engagement.

Mark: And we think of that Jim and I have a small your assistant that more personal prop M and powerful assistant for every aspect of your daily life.

Speaker Change: And so you can imagine wanting to call deeply are.

Speaker Change: And so on so it's really important when it comes to paid clicks and CPC is to avoid drawing like overly broad conclusions solely based on these metrics.

Speaker Change: Create a long video et cetera, like you know those things can be done by in the Gemini App to named banner.

Bob: Thank you Bob.

Speaker Change: All one time like we've always done we've gone through this evolution before like as you point out.

Bob: Our next question comes from Brian Nowak with Morgan Stanley. Your line is now open.

Speaker Change: We can we can understand use an independent banner and abstract some off the complex city for our users.

Brian Nowak: Thanks for taking my questions I have two.

Speaker: Can you make a bunch of like confetti circles explode out of my mouth? I'm updated to Sketch.

Brian Nowak: First of all on Sundar, there's a lot of discussion about gentex search for commercial activities and agents that can be broadly deployed maybe could you just from a technology perspective, when you sit down with the engineering teams working on some of these new agenda capabilities that could come what are some of the predominate.

Speaker Change: One point people used to go to parties.

Speaker Change: Parties have played before taxed differently from Iran, and Joe's differently from videos et cetera, and we kind of made it all seamless and excuse me my son search. So we have the experience of being able to bring together and experiences in a way that makes sense for users and do the heavy lifting for them, but what I think you know when you are in this early stage of.

Speaker: Okay, what should we build next? Okay, here's another 30 ideas for you.

Dara: New emerging pattern I am, saying, we want to make sure.

Speaker: Oh, yes.

Speaker: Let's find this game. There it is. Okay.

Dara: We can meet them van man there.

Dara: What they are expecting today and all the time I think it will give us.

Speaker: Wish it were easy to find the games you love? Come on.

Dara: And the opportunity to serve them better. So I think that's how we had thank you.

Speaker: Sports? What does that mean?

Speaker: Okay.

Dara: Okay. Thank you.

Speaker Change: <unk> point that also need to be overcome for some of these internal tools with Jenny I. Thanks.

Speaker: How do you interpret that? Okay.

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

Speaker: YouTube TV has your favorite sports and live TV in one app, so you can easily watch the games you want.

Brian Nowak: Okay.

Dara: Thank you very much two if I may please the first on cloud.

Brian Nowak: Thanks, Brian on let me start with the first one on agent became somebody's look Carl.

Rick: Jason, you still here? Sorry, Rick.

Speaker: Let's go skate. Yeah!

Speaker Change: I was just hoping maybe you could clarify your back half outlook given last quarter, you talked about some supply constraints that would ease towards the end of 2025, but yet you put up a really nice acceleration in <unk> now you're talking about.

Brian Nowak: Definitely.

Brian Nowak: Any way to spend we both to fight.

Speaker: Now here we go. I can't help it if I'm poppin', see them watch like. It's outrageous how this flavor got him shook up.

Brian Nowak: Our Cds of 2.5 models, particularly withdraw et cetera.

Brian Nowak: It's the direction that we are investing the most.

Brian Nowak: Definitely exciting progress, including in our model and so you Havent fully released yet.

Speaker: Hold up. It's effective.

Speaker Change: Some supply constraints easing into 26, if you could just clarify a little bit on the back half outlook for cloud given the strong results in <unk> and then the second is a bigger picture question, which is.

Speaker: Show me how you gon' work, work, work it out.

Brian Nowak: And the main main gaps so you know what I'm trying to do is.

Speaker: I hit it bad with a brand new style. Bring it up until the floor gets wild.

Speaker: We turnin' up all the way on the down, like work, work, work it out.

Brian Nowak: You are obviously changing a sequence of events and and so being able to do it.

Speaker: Come and show me what you're all about.

Speaker Change: An agenda experience does it does it democratize the web like searched it two decades ago, enabling discovery in the long tail or does it lead to more concentration with a smaller group of vertical winters would love. It if you could opine on that thank you.

Brian Nowak: Reliably delete them see compounds cost compounds.

Brian Nowak: And being able to do it reliably.

Brian Nowak: I use this all comes together.

Speaker: , Microsoft, Microsoft Office, Microsoft Office Word MSWordDoc Word.Document.8 The plans to oversee the peace augmentation area include a $10000 budget, $1400 genocide warranty to form the peace alliance which involves the Palestinians, Palestinians and And since the United Nation talks want to meet at the UN General Assembly on January 5, during the high infrastructure measures met at Once again, Beirut and Tigris.

Brian Nowak: In each of this.

Brian Nowak: We are making progress and it all needs to pan out.

Brian Nowak: Together.

Brian Nowak: Good news is we are making robust progress we think being on the front end there.

Dara: Right.

Dara: Okay.

Brian Nowak: And.

Dara: Okay on your first question on the cloud and second half outlook and the comments I previously made on with regards to where we're going to see the capacity increase. So obviously, we're working hard to bring more capacity online, which means datacenters and servers are coming online and we see more of an increase towards the back end of the year.

Brian Nowak: In all of these areas when you look back in a 12 month basis.

Brian Nowak: We ended up making the model it's much more efficient for any human capability. So now we're looking at Patrick.

Speaker Change: I think we'll really unlock the sand unique experience as we see the potential.

Brian Nowak: I'm going to do them.

Brian Nowak: But they are a bit slow and costly and it takes time and sometimes have bruno right, but they're making progress on all of that.

Dara: But we're crazy increasing capacity with every quarter that goes by as you can see with the.

Brian Nowak: That's what will really unlock and I expect 2026 to.

Dara: Growth rates, we've had both this quarter and in the previous quarter and Sundar mentioned earlier. This is not the type of investment that's a light switch. It takes time to make this investments of what you're seeing now with the investments we made are.

Brian Nowak: A year in which people kind of use agent experience as more broadly right and so it's an exciting opportunity ahead.

Brian Nowak: On the second part I think when you say it sounds nothing generalization I presume you're talking about how we are using.

Dara: Some time ago that is now translating to additional capacity coming online, but more of that towards the back end of the year and we'll say it's important as you think about cloud gross not to think about this and that linear fashion, because the Korean quarter growth rates could depend on the timing of capacity delivery and when that comes.

Speaker: This is Ted. Ted was born in 1998, the year of the first Google search.

Brian Nowak: All of us internally.

Speaker: And as a teenager, whatever Ted was looking for, Google helped him find it. And so it went, year after year. There was always some new question on his mind.

Brian Nowak: Okay.

Brian Nowak: Given you asked the question about agents, we are now beginning to rollout agent I think Corning.

Brian Nowak: Journeys for our software engineers within the company.

Dara: On line, so that could move.

Brian Nowak: It's been exciting to see just over the last few months.

Dara: A little bit from from quarter to quarter.

Speaker: Ted is 26 now. His life isn't so simple. Fortunately, Google still is.

Brian Nowak: Only one of the last few weeks people are definitely.

Dara: On the on agent experience okay.

Brian Nowak: Doing more agent take workflows and software engineering as well internally and that's that's a good example of the kind of.

Speaker: Why is this not working? Even when his questions are a lot of questions in one.

Dara: There was only a question.

Dara: On the technology aspects of it and how we're making progress obviously there is a.

Brian Nowak: The same experience as a few months ago I had a lot of friction points, but you know maybe on or coming in and people are beginning to use internally on the coding side class hotels since Saturday another area for the company and a small so exciting progress I expect it to be an active area everyone's rollout journeys for our users as well.

Speaker: What's something cool happening tonight in the city and still gets me home at a reasonable time?

Dara: The value proposition for all the players involved and I think that's going to be an equally important thing.

Speaker Change: Create lock unlock here.

Speaker: Which is how Ted found something he didn't even know he was looking for. Turns out, life's full of questions.

Dara: And I knew thing you know.

Speaker Change: Our time users more.

Speaker Change: It's clear to me as we make progress on the age of big experience, it's going to be a much better experience for users right and so you.

Speaker: Luckily, you can just ask Google.

Brian Nowak: On the call.

Speaker Change: Thanks Sundar has great.

Speaker Change: Our next question comes from Michael Nathanson with Moffett Nathanson. Your line is now open.

Speaker Change: You will you find a savvy interplay ash leaning into these experiences and that will help them grow and made this moment and I think I saw I do think it's an opportunity.

Speaker: I see infinite possibilities with Flow.

Michael Nathanson: Thanks, Sundar I have two for you.

Speaker: What manner of magic is that?

Speaker Change: I know you announced the partial to will be Parker develop glasses.

Speaker: AI mode is the biggest revolution since the search engine was invented.

Dara: Four.

Speaker Change: I Wonder if you share your view how important are cycled new devices will be to further scale AI do you envision a world in which the more functional over central to our consumer experience. That's one and secondly, secondly, how does Google search with AI more usage different <unk>.

Speaker: You tell Gemini exactly what you want built, and it builds it for you.

Dara: Alright, just like that.

Dara: The early early days in Nevada that are aspects about it between expand access grow grow their use cases et cetera, and I think I think everyone's out there.

Speaker: No! Coding with Gemini 2.5 Pro, it is awesome.

Speaker: Project Mariner is going to change how we use our browsers.

Speaker: It's an AI agent that gets things done for you.

Dara: But I do think it's important it's not just a technology play and from Pampa Sul and Mr. Martin on pharma meeting planners and wall and so and I think that's going to be an important part of this evolution as well.

Speaker: Notebook LM's mind map completely transforms warning.

Speaker Change: Sorry versus Gemini Standalone apps I'm wondering have you seen any differences in usage or the types of consumers, who go to the app versus traditional search with AI.

Speaker: Why is this person following me wherever I walk? That's just your shadow.

Speaker: Wait, we're going to turn right!

Speaker: AI is completely changing how we fight fires.

Brett: Thank you.

Speaker Change: And our last question comes from Justin Post with B a M. L. Your line is now open.

Speaker: Generative media is expanding the boundaries of creativity. It was magic the first time I saw this. This isn't just another tool. It's a game changer. This is just like mind-blowing to me. The potential is almost limitless.

Speaker Change: Thanks, Michael on the first thing look I I think.

Speaker Change: Anytime.

Speaker Change: Great. Thank you a couple of percent are first it looks like the subscription businesses are all tracking well and you know certainly Gemini two five has got some much good reviews.

Speaker Change: Changes.

Speaker Change: You can drive new experiences, including on our hardware experiences too. So I think a island, particularly enable long had the promise of classes and other form factors right. You know I think AI will spur a whole new.

Speaker Change: How are you doing with Gemini.

Speaker Change: Gemini subscriptions I know, it's a focus area for the company and anything you can kind of do to accelerate the consumer subscriptions of Gemini within Google One and then and then secondly, just on the course change of Capex, obviously, a bigger increase which appears to be because of <unk>.

Speaker Change: Wave of innovation there.

Speaker Change: Super excited about our investment in glasses, and you know in Thailand.

Speaker Change: Thanks, Pierre since I've taken a dramatic step up compared to the last comparable.

Brett: Cloud demand, but.

Speaker Change: Loss inflation, so I think it's been an exciting new emerging category, but I still expect phones to be at the center of experience for.

Speaker Change: Just your comments on cloud, our ROI and I'm, sorry, the Capex ROI, what gives you confidence that youre going to get good returns on that spend thank you.

Speaker Change: For the next.

Speaker Change: Two to three years at least and so.

Brett: Great.

Speaker Change: On the first thing on auto subscriptions.

Speaker Change: I still think that's going to be phones will continue to be at the center of the consumer experience, but we are excited about the emerging categories as well.

Brett: You know we've definitely Google.

Brett: Google want us being an attractive value proposition pardon my storage.

Speaker Change: Second question on AI Mone versus Gemini Standalone not broadly.

Brett: Now, our AI plans, including growing entre and particularly with the 2.5 see these components.

Speaker Change: There are some use cases, where you can you can get a great experience in more places.

Brett: Definitely seen actually good traction so it was a very healthy partner and and and so we are definitely excited about the opportunities ahead.

Speaker Change: There are use cases, which are very specific I think where the quantities are information oriented but people really wanted to rely on the information, but I have the full power of AI I think AI won't really shines in that.

James Friedland: Thank you for standing by for the Alphabet second quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.

Brett: And you will find.

Brett: At this moment I think we will be able to drive growth in that area based on our AI offerings and so it's it's definitely area we are.

Speaker Change: They're backed up.

James Friedland: After the speaker presentation, there will be a question and answer session.

Speaker Change: The Gemini modems are using search.

Brett: I'm excited by it and we're actually seeing a traction, particularly in the last corner I ever since we introduced 2.5 Pearl somebody I'm excited about our about the trajectory there on the Capex on the cloud side look I I think we are definitely investing because.

Speaker Change: Is it too and so it's all grounded in that search experience and I think I think it users are responding very positively to it.

James Friedland: To ask a question during the session, you will need to press star one on your telephone.

James Friedland: I would now like to hand the conference over to your speaker today, Jim Friedland, Head of Investor Relations. Please go ahead.

Speaker Change: And there isn't a gentleman I stand alone App.

Speaker Change: See everything Paul.

James Friedland: Thank you. Good afternoon, everyone, and welcome to Alphabet's second quarter 2025 earnings conference call.

Speaker Change: People can have a long conversation with chat just trying to pass time right.

Brett: We are delivering a lot of value to our cloud offering and I think it's important to understand.

Speaker Change: Gentlemen, I am you know you have seen any cases, there people may get into it.

Sundar Pichai: With us today are Sundar Pichai, Philipp Schindler, and Anat Ashkenazi.

Speaker Change: That would be like a <unk>.

James Friedland: Now I'll quickly cover the safe harbor.

Speaker Change: Experience right. So these are all emerging experience at all what people do and I think this is why I'm glad we have bought surfaces and we can innovate.

Brett: Uh huh.

James Friedland: Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking.

Speaker Change: ISP burn more and more of an installed base with Google cloud.

Brett: Have very high customer satisfaction, our churn rates are very low.

James Friedland: Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially.

Speaker Change: In both of these areas.

Speaker Change: That'd be areas, which will be commonly found by both applications and all the time I think we can make the experience more seamless for our users.

Brett: And we are much more efficient.

Brett: In the investments needed to grow those businesses. So you are seeing all of that play out in our margin trajectory, particularly if you look at it.

James Friedland: Please refer to our forms 10-K and 10-Q, including the risk factors.

Speaker Change: Thanks Sundar.

James Friedland: We undertake no obligation to update any forward-looking statement.

Speaker Change: Our next question comes from Mark Shmulik with Bernstein. Your line is now open.

Speaker Change: And when the sequence that you won in the past.

James Friedland: During this call, we will present both GAAP and non-GAAP financial measures.

Speaker Change: Few years, and so and you know so all of that gives us confidence that we are investing in this oh, we will.

Mark Shmulik: Yes, thanks for taking the question.

James Friedland: 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.

Mark Shmulik: It seems there's almost like a daily news report about the AI talent War and high profile folks moving around which is kind of like your perspective on how you think Google has been doing it both kind of attracting and retaining key AI talent and a lot of that similar.

Speaker Change: We'll be able to.

Speaker Change: Have a healthy ROI on our investments and particularly in this moment.

Speaker Change: There's definitely a value we are delivering to the customers.

James Friedland: Our comments will be on year-over-year comparisons unless we state otherwise.

Speaker Change: It is also growing significantly on a forward looking basis, and so I think all of that will.

Mark Shmulik: Similar lines, how do we think about AI related resourcing costs, alongside kind of the step up in capital investments required to go build for AI. Thank you.

Sundar Pichai: And now, I'll turn the call over to Sundar. Thanks, Jim. Good afternoon, everyone.

Speaker Change: It will help us pneumonia.

Sundar Pichai: Q2 was a standout quarter for us with robust growth across the company. As you saw at I-O, we are leading at the frontier of AI and shipping at an incredible pace. AI is positively impacting every part of the business, driving strong momentum.

Mark Shmulik: Yeah.

Mark Shmulik: Mark.

Mark Shmulik: The first question look.

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

Mark Shmulik: I think.

Mark Shmulik: We've gone through these moments before we've obviously always deeply invested in in.

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

Mark Shmulik: In parallel, including an AI talent for well over a decade now and.

Sundar Pichai: This quarter, search delivered double-digit revenue growth. Our new search features continue to perform well. AI mode has launched in the U.S. and India and is going well, while AI overviews now has over 2 million monthly users across more than 200 countries and territories and 40 languages.

Mark Shmulik: We have an extraordinary breadth and depth of the talent.

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

Mark Shmulik: In my experience.

Mark Shmulik: The top people look for a combination of.

Speaker Change: [music].

Mark Shmulik: They want to really be at the frontier driving progress and then so the mission and.

Mark Shmulik: And how state of the art workers manner. So that's super important access to compute resources.

Sundar Pichai: I'll give some more details on search in a moment. We continue to see strong performance in YouTube as well as subscription. reflecting great momentum across these high-growth businesses.

Mark Shmulik: Access to your peers right working with the best people in the industry and it's a combination of all of that and using it to drive impact and I think we are pretty competent them on all those fronts and through this moment, we continue to look at the Oh retention metrics as well as the new talent.

Sundar Pichai: In the U.S., shorts now earn as much revenue per watch hour as traditional in-stream on YouTube. And in some countries, it now even exceeds in-stream stream.

Mark Shmulik: Being in and both are healthy.

Mark Shmulik: Healthy.

Mark Shmulik: I do know individual cases can make headlines and we looked at a lot more steeply I think we are doing very well through this moment.

Sundar Pichai: CloudHead, another great quarter of strong growth in revenues, backlog, and profitability. annual revenue run rate is now more than $50 billion.

Mark Shmulik: And well continue investing in it.

Sundar Pichai: We are seeing significant demand for our comprehensive AI product portfolio.

Mark Shmulik: People and.

Mark Shmulik: And the talent and the compute needed to make sure we are set up well for the opportunity and maybe yellow.

Sundar Pichai: Of course, this is all possible because of the long-term investments we have made in our differentiated, full-stack approach to AI. This spans AI infrastructure, world-class research, models and tooling, and our products and platforms that brings AI to people all over the world.

Mark Shmulik: Yeah on the question on how we integrate this into our overall cost structure and I've mentioned before having the the benefit of having the full stack includes research, which is our people and one of our most critical resource. So we make sure that we invest appropriately to have the best and brightest minds in the industry sitting here at Google and advancing our innovation to customers.

Sundar Pichai: I'll briefly touch on the AI stack before turning to quarterly highlights.

Sundar Pichai: AI infested. We operate the leading global network of AI-optimized data centers and cloud regions. We also offer the industry's widest range of TPUs and GPUs, along with storage and software built on top.

Mark Shmulik: It is part of what you're seeing now in our operating expense line across the organization, but we're also working hard to offset not just growth in.

Mark Shmulik: Investment across the business, but also to ensure that we can allocate resources appropriately. So sundar mentioned earlier the use of AI tools within the company. So that's another area, where we can drive efficiency across the businesses to use these tools internally and.

Sundar Pichai: That's why nearly all Gen-AI unicorns use Google Cloud, and it's why a growing number, including leading AI research labs like SAFE Superintelligence and Physical Intelligence, use TPU specifically. Our AI infrastructure investments are crucial to meeting the growth and demand from cloud customers.

Mark Shmulik: In terms of how we run the organization and then we're continuing on the same efforts that I've talked about before with regards to running the company with a high level of disciplined execution and driving efficiency across the business.

Sundar Pichai: Next, world-class AI research, including models and tooling. We continue to expand our Gemini 2.5 family of hybrid reasoning models which provide industry-leading performance in nearly every major benchmark. In addition to improving our popular workhorse model Flash, we debuted an extremely fast flashlight version.

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

Ross Sandler: Great if I can add to that would be great. So the first one is on.

Speaker Change: Search click through rates as a driver of monetization. So you guys are doing a great job over the past decade.

Sundar Pichai: We achieved gold medal level performance in the International Math Olympiad using an advanced version of Gemini with DeepMind.

Speaker Change: Driving better AD relevancy and higher click through rates and search.

Sundar Pichai: We can't wait to bring DeepThink to users soon. We have some of the best models available today at every price point. Our 2.5 models have been a catalyst for growth, and 9 million developers have now built for Gemini.

Speaker Change: I'm just curious as we look forward and we see lower AD impressions per serve.

Speaker Change: All of these things that are changing with AI overviews and.

Speaker Change: Different AI search.

Speaker Change: Formats, how do you feel about your ability to drive <unk> going forward and then the second question is.

Sundar Pichai: I also want to mention VO3, our state-of-the-art video generation model. It's been a viral hit with people sharing clips created in the Gemini app and with our new AI filmmaking tool, Flow. Since May, over 70 million videos have been generated using VO3. And we recently introduced a feature in the Gemini app to turn photos into videos, which people absolutely love. It's also rolling out to Google Photos users starting today.

Speaker Change: It looks like Youre, not working with open AI for.

Speaker Change: Some aspect of cloud infrastructure.

Speaker Change: Curious all.

Speaker Change: That relationship might expand in the future. Thank you.

Speaker Change: Yeah.

Speaker Change: I can.

Speaker Change: Take the first one I'm looking at specifically, referring to the air of reviews, if I understood. Your question correctly.

Sundar Pichai: Third, our products and platforms. We are bringing AI to all our users and partners through surfaces like Workspace, Chrome, and more. The growth and usage has been incredible. At ION May, we announced that we processed 480 trillion monthly tokens across our services. Since then, we have doubled that number, now processing over 980 trillion monthly tokens, a remarkable increase. The Gemini app now has more than 450 million monthly active users and we continue to see strong growth and engagement with daily requests growing over 50% from Q1. In June alone, over 50 million people used AI-powered meeting notes in Google Meet.

Speaker Change: Sundar mentioned it are they continue to derive higher satisfaction. The continued drive higher search users are they scaling up very nicely.

Speaker Change: They're actually working for our entire user base no skilled over 2 billion users and I'll go to other countries.

Speaker Change: So very happy with this development, but when it comes specifically to the monetization of it we talked about it before we see monetization at approximately the same rate, which gives us actually a really strong base on which we can innovate.

Speaker Change: That drive for you more no benefit you at next generation AD format.

Speaker Change: That's how we look at it at this moment.

Speaker Change: Yeah.

Speaker Change: On the second part.

Speaker Change: With respect to me I look we're very excited to be partnering with them on Google cloud.

Sundar Pichai: And powered by VO3, our new short video product and workspace called Google Vets reached nearly 1 million monthly active users.

Speaker Change: Google Cloud.

Speaker Change: As a platform and we have a store.

Sundar Pichai: This month at Samsung Galaxy Unpacked, we announced new Android and AI features that are available on Samsung's latest devices.

Speaker Change: All history of supporting.

Speaker Change: Great companies startups, AI labs et cetera, So super excited about our partnership there on the cloud side.

Sundar Pichai: And we are really pleased with the growth in subscriptions, which got a boost from our Google AI Pro and Ultra plan.

Speaker Change: And and Oh.

Speaker Change: We look forward to investing more in that relationship and growing there.

Sundar Pichai: Now some key highlights from Search, Cloud, YouTube, and Waymo for the quarter.

Sundar Pichai: First up, this is an incredibly exciting moment for Sun. We see AI powering an expansion in how people are searching for and accessing information, unlocking completely new kinds of questions you can ask Google. Overall queries and commercial queries on search continue to grow year over year. and our new AI experiences significantly contributed to this increase in use. We are also seeing that our AI features cause users to search more as they learn that search can meet more of their needs.

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

Mark Mahaney: Okay. Two questions. Please first could you describe maybe fill up what you see in terms of the AD environment, maybe for the back half of the year, maybe versus last year does it seem as.

Speaker Change: Certain or as uncertain as it was last year and the results seem pretty strong are there any any any unusual concerns you would have for the back half of the year and then Sundar I'll ask again about the two surfaces approach to search and.

Speaker Change: So you got some you must have some internal metrics that would tell you that that's the that's the optimal way for you to approach the market but.

Sundar Pichai: That's especially true for younger users.

Sundar Pichai: Let me go deeper on our new search experience. We know how popular AI overviews are because they are now driving over 10% more queries globally for the types of queries that show them, and this growth continues to increase over time. AI overviews are now powered by Gemini 2.5, delivering the fastest AI responses in the industry. We also saw strong growth in the use of multimodal search, particularly the combination of lengths of circle to search together with AI overview. whose growth was most pronounced among younger users. Our new end-to-end AI search experience, AI mode, continues to receive very positive feedback, particularly for longer and more complex questions.

Speaker Change: I'm sure. There's a counter argument that just hasn't got unified search and being able to discern the intent of the search whether its pure information of our commercial just from Macquarie.

Speaker Change: That could give you a material advantage over other offerings in the market you just talk a little bit about what metrics you've seen that.

Speaker Change: It does make the two surface solutions seem to be optimal thank you.

Speaker Change: So let me start look are referred RF business performed strongly in Q2.

Speaker Change: To give you maybe some vertical color of it are in Q2 search and other performance was led by growth across all verticals.

Speaker Change: We mentioned the largest contributions from retail and financial services.

Speaker Change: Which was probably do extra to strength that insurance, we saw health care as a sizable contributor to growth as well.

Sundar Pichai: It's still rolling out, but already has over 100 million monthly active users in the U.S. and India.

Speaker Change: Look we're only a few weeks into Q3, so I think it's really too early to comment on anything happened in the second half of the year.

Sundar Pichai: We plan to keep enhancing the AI mode experience for users by shipping great features fast. that includes our advanced research tool, DeepSearch, and more personalized responses.

Speaker Change: Okay.

Speaker Change: And Mark on the second.

Speaker Change: The second part of the question.

Sundar Pichai: Next, Google Cloud. We see strong customer demand driven by our product differentiation and our comprehensive AI product portfolio.

Speaker Change: Okay. Thank you.

Speaker Change: You know that the create between these two services you're pretty much it.

Speaker Change: And are you covering and Pam.

Sundar Pichai: Four stats show this. One, the number of deals over $250 million, doubling year-over-year. Two, in the first half of 2025, we signed the same number of deals for $1 billion that we did in all of 2024. Three, the number of new GCP customers increased by nearly 28% quarter over quarter. or more than 85,000 enterprises including LVMH, Salesforce, and Singapore's DBS bank, now built with Gemini, driving a 35x growth in Gemini usage year-over-year.

Speaker Change: The breadth and depth of our you know humana.

Speaker Change: Humanity can't possibly do so I think thats right.

Speaker Change: <unk> San Francis to tackle in this moment obviously.

Speaker Change: You are right. So it's just more information August and we think of that Jim and I have a small your assistant that more personal proactive and powerful assistant for every aspect of your daily life.

And so you can imagine I wanted to call deeply are.

Speaker Change: Create a long video et cetera, like you know those things can be done by the Gemini app to named banner.

Speaker Change: All what I'm like we've always done and we've gone through this evolution before like as you point out.

Sundar Pichai: Our models have served on our AI infrastructure, which offers industry-leading performance and cost efficiency for both training and infrastructure. Along with our AI accelerators, we introduced new innovations in storage, including Anywhere Cache, which improves inference latency by up to 70%, and Rapid Storage, which delivers a 5x improvement in latency compared to leading hyperscalers. In addition, we have optimized AI software packages, including PyTorch and JAX, with full open-source supports for various AI training and serving demand. We've also integrated AI agents deeply into each of our cloud products.

Speaker Change: We can we can understand use an independent banner and abstract some off the complex city for our users at one point people used to go to.

Speaker Change: You know price I paid before tax.

Speaker Change: From a manager is differently from videos et cetera, and we kind of made it all seamless and excuse me my son search. So we have the experience of being able to bring together experiences in a way that makes sense for users and do the heavy lifting for them, but what I think you know when you are in this early stage of a new emerging pattern I am saying, we want to make sure.

Speaker Change: We can meet them bad bad there.

Speaker Change: What they are expecting today and all the time I think I'll give us.

Speaker Change: And the opportunity to serve them better. So I think that's all we had thank you.

Sundar Pichai: Wayfair is leveraging our databases integrated with AI to streamline data pipelines and deliver more personalized customer experience. Vantel is leveraging our Gemini-powered data agents and BigQuery to review and act on product feedback more quickly. Target is using our Gemini-powered threat intelligence and security operations agents to improve cyber security.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question comes from Ken Garosci with Wells Fargo. Your line is now open.

Speaker Change: Thank you very much two if I may please the first on cloud.

Speaker Change: I'm, just hoping maybe you could clarify your back half outlook given last quarter, you talked about some supply constraints that would ease towards the end of 2025, but yet you put up a really nice acceleration in <unk> now you're talking about.

Sundar Pichai: Capgemini is utilizing our AI software engineering agents to deliver higher quality software faster by automating tasks from code generation to test And BBVA says Gemini and Google Workspace is saving employees nearly three hours per week by automating repetitive tasks. It's now rolling it out to 100,000 employees globally.

Speaker Change: An agenda experience does it does it democratize the web like search did two decades ago, enabling discovery in the long tail or does it lead to more concentration with a smaller group of vertical winters would love. It if you could opine on that thank you.

Sundar Pichai: We're also focused on building a flourishing AI agent ecosystem. We introduced an open source agent development kit, which now has over a million downloads in less than four months. We also introduced AgentSpace, an open and interoperable enterprise chat search and agent platform. Gordon Food Service is bringing agent space to its U.S. employees, which is enabling better, more efficient decision-making. and over 1 million subscriptions have been booked for AgentSpace ahead of its general availability.

Speaker Change: Right.

Speaker Change: Okay on your first question on the cloud second half outlook and the comments I previously made on with regards to where we're going to see the capacity increase. So obviously, we're working hard to bring more capacity online, which means datacenters and servers are coming online and we see more of an increase towards the <unk>.

Sundar Pichai: Turning now to YouTube. Nielsen data shows YouTube has lent you a streaming watch time for over two years.

Speaker Change: Back end of the year, but we're crazy increasing capacity with every quarter that goes by as you can see with the.

Sundar Pichai: A generation that grew up with YouTube on their devices is now increasingly watching their favorite creators and content on their television. that includes millions of sports fans too. Globally, they consume more than 40 million hours of sports content on YouTube annually.

Speaker Change: Growth rates, we've had both this quarter and in the previous quarter and Sundar mentioned earlier. This is not the type of investment that's a light switch. It takes time to make this investment so what you're seeing I was an investment we made a.

Speaker Change: Some time ago that is now translating to additional capacity coming online, but more of that towards the backend of the year. It will say it's important as you think about cloud gross not to think about this and that linear fashion, because the Korean quarter growth rates could depend on the timing of capacity delivery and when that comes.

Sundar Pichai: And in September, we'll stream the NFL's first Friday game of the season, live from Brazil. From sports to shorts, we now average over 200 million daily views on YouTube Shorts. AI is helping improve our recommendations and auto-dubbing, which translates to better returns for creators and brands by dramatically increasing the potential audiences they can reach.

Speaker Change: On line, so that could move.

Speaker Change: A little bit from from quarter to quarter.

Sundar Pichai: And today, we began rolling out a whole draft of new AI tools for creators on YouTube show.

Speaker Change: Okay.

Speaker Change: On agent experience okay.

Speaker Change: There was only a question.

Sundar Pichai: And finally, YouTube continues to diversify its subscription options, recently expanding its Premium Lite offerings to 15 new countries, with more to come.

Speaker Change: On the technology aspects of it and how we are making progress obviously there's.

Speaker Change: The value proposition for all of the plants in wall and I think that's going to be an equally important thing to create and unlock here.

Sundar Pichai: And lastly, Waymo continues to scale and expand to safely serve more riders in more places. Last month, Waymo launched in Atlanta, more than doubled its Austin service territory, and expanded its Los Angeles and San Francisco Bay Area territories by approximately 50%.

Speaker Change: And I do think you know our time use as well.

Speaker Change: It's clear to me as we make progress on the agent experience, it's going to be a much better experience for users.

Sundar Pichai: Maymo also launched teen accounts starting with riders age 14 to 17 in Phoenix. Overall, great momentum here. The Waymo driver has now autonomously driven over 100 million miles on public roads. And the team is testing across more than 10 cities this year, including New York and Philadelphia. We hope to serve riders in all 10 in the future.

Speaker Change: And so you.

Speaker Change: You will find a savvy interplay asked leaning into these experiences and that will help them grow and made this moment and I think I saw I do think it's an opportunity for us for some of the players and so you are right just like.

Speaker Change: The early early days in Nevada that are aspects about it which will expand access grow grow their use cases et cetera, and I think I think the elements are there but.

Sundar Pichai: As I said, a standout quarter. A big thank you, as always, to our employees and partners for an amazing Q2.

Speaker Change: But I do think it's important it's not just a technology play and Pampa Sul.

James Friedland: Turn it over to you. Thanks, Sundar, and hello, everyone.

Speaker Change: This morning on form of meeting planners in Warsaw, and I think that's going to be an important part of that.

Philipp Schindler: I'll quickly cover performance for Google services for the quarter, then structure the rest of my remarks around the great progress we're delivering across Search, Ads, YouTube, and Partnerships. Google services revenues were $83 billion for the quarter, up 12% 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 our results, the 12% increase in search and other revenues was led by growth across all verticals with the largest contributions from retail and financial services. YouTube saw similar performance across verticals. Its 13% growth in advertising revenues was driven by direct response followed by brand.

Speaker Change: Evolution as well.

Speaker Change: Thank you.

Speaker Change: And our last question comes from Justin Post with B a M. L. Your line is now open.

Great. Thank you a couple of percent are first it looks like the subscription businesses are all tracking well and certainly Gemini two five has got some much good reviews, how how are you doing with Gemini.

Philipp Schindler: starting with search and other revenues, which delivered over $54 billion in revenue for the quarter.

Speaker Change: Cloud demand, but.

Philipp Schindler: Shifts like AI are what propels our industry forward. Gemini's native multimodality is helping bring the offline audio and visual world back into the online world, creating a number of opportunities for search. Let me share a few examples. Take visual queries. Google Lens searches are one of the fastest growing query types on search and grew 70% since this time last year. The majority of Lens searches are incremental, and we're seeing healthy growth for queries using Lens. And you can obviously take this to the next level by moving from image to video-based capabilities like Search Live. And then there's Circle2Search, which is now on over 300 million Android devices.

Speaker Change: Just your comments on cloud Roy and I am sorry, Capex ROI, what gives you confidence that youre going to get good returns on that spend thank you.

Speaker Change: Great.

Speaker Change: On the first thing on auto subscriptions.

Speaker Change: We've definitely Google.

Speaker Change: Google want us being an attractive value proposition pardon my storage.

Speaker Change: Now, our AI plants, including growing altra.

Speaker Change: Clearly with the 2.5 see these components.

Speaker Change: Definitely see.

Speaker Change: <unk> accelerated traction so it was a very healthy partner and and and so we are definitely excited about the opportunities ahead.

Philipp Schindler: We've been adding capabilities to help people explore complex topics and ask follow-up questions without switching apps. For example, gamers can now use Circle2Search while playing mobile games to see an AI overview or answer.

Speaker Change: And you will find.

Speaker Change: Through this moment I think we will be able to drive growth in that area.

Speaker Change: Our AI offerings and so it's definitely an area we are holding.

Philipp Schindler: And just last week, we brought a new agentic capability directly into search for all US users with AI-powered calling to local businesses.

Speaker Change: I'm excited by it and we are actually seeing traction, particularly the last corner I ever since we introduced 2.5 Pearl somebody I'm excited about our about the trajectory there on the Capex on the cloud side look I I think we are definitely investing because.

Philipp Schindler: Finally, shopping. We're in Q2. We introduced a virtual try-on experience for Search Labs users in the U.S. Now people can try billions of clothing products on themselves, virtually. Early results and engagement have been extremely positive, particularly with Gen Z users, and we'll be bringing this functionality to all U.S. users imminently.

We are delivering a lot of value to our cloud offering and I think it's important to understand.

Speaker Change: Uh huh.

Philipp Schindler: All these innovations are opening up completely new ways for people to use technology, bringing the offline world into the online world in ways that simply have not been possible before. Add in our amazing AI translation capabilities, and just imagine the possibilities. People can access more content in the language, and businesses, large and small, international or local, can reach even more customers. I'm excited about how all of these elements will come together and the opportunities ahead of us in search.

Speaker Change: ISP burn more and more of an installed base with Google cloud.

Speaker Change: We have very high customer satisfaction.

Speaker Change: Rates are very low.

Speaker Change: And we are much more efficient.

Speaker Change: And the investments needed to grow those businesses. So you are seeing all of that play out in our margin.

Speaker Change: Particularly if you look at it and when he sequentially or in the past.

Speaker Change: Few years, and so and so all of that gives us confidence that we are investing in this we will.

Philipp Schindler: Moving to ads, where a strategy to reinvent the entire marketing process with AI is delivering value for our customers and our business. Last quarter, we introduced AI Max & Search, a new suite of AI-powered features in existing search campaigns. Advertisers that activate AIMAX in search campaigns typically see 14% more conversions. On media buying, Smart Bidding Exploration, the biggest update to bidding strategy in a decade, brings better performance to advertisers by allowing them to bid on less obvious but potentially higher value queries more often. Campaigns using Smart Bidding Exploration see a 19% increase in conversions on average.

Speaker Change: We'll be able to.

Speaker Change: How 'bout healthy ROI on our investments.

Speaker Change: I mean, this AI moment.

Speaker Change: There's definitely a value we are delivering to the customers.

Speaker Change: <unk> is also growing significantly.

Speaker Change: Forward looking basis, and so I think all of that will.

Speaker Change: It will help us.

Speaker Change: Yeah.

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

Philipp Schindler: Demand Gen continues to drive revenue growth and deliver measurable impact for our customers. As an example, Depop, Etsy's resale clothing marketplace, used the shorts-only Demand Gen campaign to drive new customers to the site. Shorts drove 80% higher brand love and double click-through rates versus benchmarks.

Speaker Change: Thanks, everyone for joining us today, we look forward to speaking with you again on our third 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.

Philipp Schindler: On Creatives, we launched Asset Studio, using our latest models to help businesses, large and small, generate creative assets. Small businesses benefit from top-quality assets and deployment scaling capabilities, but larger businesses can go faster from proof-of-concept to launch than resized at lower cost. Over 2 million advertisers now use Google's AI-powered asset generation tools to run ads, a 50% increase on this time last year.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [noise].

Philipp Schindler: Turning to YouTube, where we saw continued strong revenue growth driven by direct response followed by brand. YouTube creators are connected to the global zeitgeist and trusted by their audiences like no other. As part of BrandConnect, we launched Creator Partnership Hub, which allows brands to more easily work with the right creators and tap into cultural moments. We introduced VO3, photo to video, and generative effects to shorts, making content creation easier and offering unexplored avenues for creativity. We're seeing both the volume and the price of ads in shorts increase, particularly in developed markets. The feed-based nature of the product allows for more ad opportunities on average, and this growth is further supported by ad formats native to shorts, AI-powered ad creative resizing tools, improved ad targeting, and the rise in viewer engagement.

Philipp Schindler: McDonald's USA harnessed the influence of YouTube creators to ignite awareness for the Minecraft movie meal. It leveraged YouTube Shorts partnership ads to increase its reach, generating a 3.3 times higher view-through rate than the industry benchmark.

Philipp Schindler: Finally, on CTV, where the momentum continues. According to the Gauge report by Nielsen, YouTube has been number one in streaming watch time in the US for more than two years, hitting a record high of 12.8% of total TV viewing in June 2025. In the past 12 months, YouTube ads viewed on CTV screens drove over 1 billion conversions. We saw strong growth in retail thanks to CTV shopping ads, which allows viewers to shop directly via QR codes, helping us leverage direct marketing opportunities.

Philipp Schindler: As always, I'll wrap up with the momentum we're seeing in partnerships, where customers increasingly recognize the strength and breadth of Google's ability to help them transform their business with AI. For instance, a new partnership with PayPal will improve the digital commerce experience for their merchants and customers. PayPal will expand its Google Cloud adoption for AI-driven recommendations, transaction processing, and enhanced security. The partnership also broadens the availability and functionality of PayPal's payment services and capabilities across a range of Google products.

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.

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

Anat Ashkenazi: I'll end with some commentary on our outlook for the second half of 2025. We had another solid quarter in Q2. Consolidated revenue of $96.4 billion, increased by 14%, or 13% 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 $39 billion, up 10%. TAC was $14.7 billion, up 10%, and Other Costs of Revenue was $24.3 billion, up 10%, with the increase primarily driven by content acquisition costs, largely for YouTube, followed by depreciation. Total operating expenses increased 20% to $26.1 billion.

Anat Ashkenazi: The biggest driver of growth was expense for legal and other matters, which reflected the impact of $1.4 billion charge related to a settlement in principle of certain legal matters. R&D investments increased by 16%, primarily driven by increases in compensation and depreciation expenses. Sales and marketing expenses increased 5%, primarily reflecting an increase in advertising and promotional expenses. Operating income increased 14% this quarter to $31.3 billion, and operating margin was 32.4%. operating margin benefited from strong revenue growth and continued efficiencies in our expense base, partially offset by the legal charge I mentioned earlier, and a significant increase in depreciation expenses.

Anat Ashkenazi: Net income increased 19% to $28.2 billion and earnings per share increased 22% to $2.31. We generated free cash flow of $5.3 billion in the second quarter and $66.7 billion for the trailing 12 months. Free cash flow in the second quarter was affected by a sizable sequential increase in CapEx and cash tax payments as we make federal tax payments in the second quarter for both Q1 and Q2. We ended the quarter with $95 billion in cash and marketable securities. Turning to segment results, Google services revenues increased 12% to $82.5 billion, reflecting strength in Google Search and YouTube advertising and subscription.

Anat Ashkenazi: Google search and other revenues increased by 12% to $54.2 billion. Search and other revenues deliver growth across all verticals, with the largest contributions coming from retail and financial services. YouTube advertising revenues increased 13% to $9.8 billion, driven by direct response advertising, followed by brand. Network advertising revenue of $7.4 billion, we're down 1%. Subscription, platforms, and devices revenues increased 20% to $11.2 billion, primarily reflecting growth in subscription revenues. This growth was driven by YouTube subscription offerings followed by Google One with growth in paid subscriptions being the biggest driver of revenue growth. Google's service operating income increased 11% to $33.1 billion.

Anat Ashkenazi: Operating margins was flat year on year at 40.1%, as healthy revenue growth and continued efficiency in our expense space were partially offset by the legal charge I mentioned earlier. Turning to the Google Cloud segment, which delivered very strong results this quarter, revenues increased by 32% to $13.6 billion in the second quarter, reflecting growth in GCP across core and AI products at the rate that was much higher than cloud's overall revenue growth. and Growth in Google Workspace, driven by an increase in average revenue per seat and the number of seats. Google Cloud operating income increased to $2.8 billion, and operating margin increased from 11.3% to 20.7%.

Anat Ashkenazi: The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base, partially offset by higher technical infrastructure usage costs, which includes the associated depreciation. As we ramp our AI investments, we continue to focus on driving improvements in productivity and efficiency to offset growth in technical infrastructure-related expenses, particularly from higher depreciation. Google Cloud Backlog increased 18% sequentially in Q2 and 38% year-over-year, reaching $106 billion at the end of the quarter. This growth was driven by strong demand for our products and services from both new and existing customers. As Sundar mentioned, we have signed multiple billion-dollar-plus deals in the first half of the year.

Anat Ashkenazi: As for other bets, in the second quarter, revenue were $373 million, and operating loss was $1.2 billion. Within Other Bets, we're allocating more resources to businesses like Quaymont, where we see opportunities to create additional value. With respect to CapEx, in the second quarter, our CapEx was $22.4 billion. The vast majority of our CapEx was invested in technical infrastructure, with approximately two-third of investments in servers and one-third in data centers and networking equipment. In Q2, we returned capital to shareholders through the purchase of stock of $13.6 billion and dividend payments of $2.5 billion.

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 half of 2025, as well as an updated outlook for full-year CapEx. First, in terms of revenues, we're pleased with the overall momentum we're seeing across the business. At current spot rates, we could see a tailwind to our revenue in Q3. However, volatility and exchange rates could affect the impact of FX on Q3 revenue. As for our segments, in Google services, advertising revenues in the second half of 2025 will be affected by the following.

Anat Ashkenazi: The continued lapping of the strength we experienced in financial service verticals throughout 2024 and year-over-year comparisons will be negatively impacted by the strong spend on U.S. selection in the second half of 2024, particularly on YouTube. In cloud, as I mentioned, the demand for our products is high, as evidenced by the continued revenue growth and the cloud backlog of $106 billion. While we have been working hard to increase capacity and have improved the pace of server deployment, we expect to remain in a tight demand-supply environment going into 2026. Moving to investments, given the strong demand for our cloud products and services, we now expect to invest approximately $85 billion in CapEx in 2025, up from a previous estimate of $75 billion.

Anat Ashkenazi: Our updated outlook reflects additional investment in servers, the timing of delivery of servers, and an acceleration in the pace of data center construction, primarily to meet cloud customer demand. Looking out to 2026, we expect a further increase in CapEx due to the demand we're seeing from customers, as well as growth opportunities across the company. We will provide more details on the 2026 CapEx Outlook on a future earnings call. 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.

Anat Ashkenazi: In the second quarter, depreciation increased $1.3 billion year-over-year to $5 billion, reflecting a growth rate of 35%. Given the recent increase in CapEx investments, we expect the growth rate and depreciation to accelerate further in Q3. Second, as we've previously said, we expect some headcount growth in 2025 in key investment areas. In the third quarter, we expect a sequential increase in total headcount additions, due in part to the hiring of new graduates. And third, Q3 will reflect the expense associated with the upcoming August launch of the new Pixel family of products.

Anat Ashkenazi: In conclusion, as you heard from Sundar and Philipp, we're pleased with the momentum in the business and excited about the pace of innovation. Our full stack approach, which combines AI infrastructure, AI research, and AI products and platforms, position us well to deliver new products and services across the company. We're seeing great momentum with our AI efforts, as demonstrated by the increase in cumulative token process. Search revenues are seeing healthy growth with features like AI Overviews, AI Mode, and Lens offering new ways for users to access information. Cloud has reached an annual revenue run rate of more than $50 billion and is delivering margin expansion while continuing to invest to meet customer demand.

Anat Ashkenazi: And YouTube has expanded its addressable market by building new services like Shorts, which now averages over 200 billion daily views. We're excited to see the value our products and services are bringing to customers and partners around the globe.

James Friedland: Now I'll turn the call over to the operator and Sundar and Philipp and I will take your questions. Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To prevent any background noise, we ask that you please mute your line once your question has been stated.

James Friedland: Your first question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

Eric Sheridan: Maybe one for Sundar and one for Philipp. Sundar, when you think about the journey you're on with respect to the evolution of products and platforms, how do you think about some of the implications of change consumer behavior and how investors should think about that from the volume perspective versus the monetization perspective? Because I think there's a lot of longstanding dynamics out there about clicks and click monetization that might be very different when you look out over the next three to five years.

Sundar Pichai: Philipp, when you think about the evolution of YouTube, you made a number of comments there about subscription revenue. I'm just curious how you think about the mix of advertising versus subscription and what some of your key learnings might have been as the subscription side of the business continues to scale. Thank you. Thanks, Eric. Appreciate the question. I do think, looking ahead, based on everything we are seeing, it's a... People are excited about AI. They're adopting it well across our product. For me, you know, just seeing multi-modality, how people have modified their behavior to include images, both through Lens and Circle to Search, seamlessly as part of interacting with Google, you know, are early indications that people are going to be adopting through these moments very, very well.

Philipp Schindler: I think I'm trying to understand your question in terms of about clicks and click monetization. Maybe that's something Philipp can touch on. But overall, we expect, as we build out our organic experiences, you know, we have a good understanding of how to continue training on monetization. So that will work well with organic experiences. And but we will lead with organic experience. So in terms of newer services like Gemini app, et cetera, we'll focus on the organic experience for the near term. But just like we are doing with AI All Views and with AI Mode over time, you know, we'll be able to bring very, very good commercial experiences there as well.

Philipp Schindler: And we think people will adapt to them as they've always done. Maybe Philipp can add more.

Philipp Schindler: Philipp? Yeah, so your question on YouTube subscriptions versus ads, look, I mean, we love our ads business. We love our subscription business. YouTube subscriptions are increasingly important for YouTube. We'll definitely continue our long-term focus here. We had a strong growth across YouTube subscription products, which includes, just to be clear, YouTube TV, YouTube Music, and Premium. And I think one common theme for our subscription services in general is offering viewers more choice here. We also have a very deep understanding of the monetization side here. Where are we monetizing more with ads? Where can we potentially monetize more with subscriptions?

Philipp Schindler: So I think we will continue this as a double-tier strategy actively going forward. Thank you.

Douglas Anmuth: Our next question comes from Doug Anuth with JPMorgan. Your line is now open.

Douglas Anmuth: Thanks so much for taking the questions.

Douglas Anmuth: One for Sundar, one for Philipp. Sundar, can you just talk about how you're thinking about your current access to compute? Even as you spend $10 billion more this year in CapEx, you also said that you're still in a tight supply environment, so you're just trying to marry those.

Sundar Pichai: And then Philipp, perhaps on search growth, can you talk a little bit about paid click and pricing growth, just within the 12% search growth, and how we should think about volume versus monetization trends going forward? Thanks. Doug, thanks. You know, on the CapEx stuff, you know, obviously, we are you know, seeing strong momentum across across our portfolio and especially in cloud. You are right, it's a tight supply environment, and we are investing more to expand, but there is obviously a time delay between this additional investment will play out in future years, and so that's why both of them are true at the same time.

Sundar Pichai: But we are planning ahead, and we are investing, but overall it's exciting to see the traction, particularly in cloud, I think the comprehensiveness of our AI portfolio, the breadth of our offering. um you know both both providing our models on GPUs and TPUs for our customers all of that has been really driving demand and so we are investing to uh to match And on your paid-click question, look, to be very clear, I think we said this before, we manage the business to drive great outcomes for our users and an attractive ROI for our advertisers. We actually don't manage to pay clicks and CPC targets.

Sundar Pichai: Some of the product and policy changes we make actually drive better monetization at the expense of paid clicks. You will actually see in the 10Q paid clicks were up 4% year on year, but a number of factors affect these metrics from quarter to quarter, such as a few examples, advertiser spending, product changes, policy changes, user engagement, and so on. So it's really important when it comes to paid clicks and CPCs to avoid drawing overly broad conclusions solely based on these metrics.

Brian Nowak: Thank you both.

Brian Nowak: Our next question comes from Brian Nowak with Morgan Stanley. Your line is now open.

Brian Nowak: Thanks for taking my questions. I have two. First one, Sundar, there's a lot of discussion about agentic search for commercial activities and agents that can be broadly deployed.

Sundar Pichai: Maybe could you just, from a technology perspective, when you sit down with the engineering teams working on some of these new agentic capabilities that could come, what are some of the predominant technological hurdles that you think need to be cleared in order to launch scalable agents for commercial queries is the first one. Then the second one, I think in the past, you've updated us on stats on sources of internal efficiency you've seen from Gen AI enabled capabilities. Any updates there, and then any sort of learnings on friction points that also need to be overcome for some of these internal tools with Gen AI?

Sundar Pichai: Thanks. Thanks, Brian.

Sundar Pichai: Let me start with the first one on agentic capabilities. Look, overall, we are definitely, in many ways, when we built 2.5, our series of 2.5 models, particularly with Pro, etc., you know, it's the direction where we are investing the most. There's definitely exciting progress, including in the models we haven't fully released yet. And, you know, the main gaps we are all trying to do is You know, you're obviously chaining a sequence of events. And so being able to do it reliably, the latency compounds, the cost compounds, and being able to do it reliably in a way for the users, all of this comes together.

Sundar Pichai: In each of this, we are making progress, and it all needs to kind of hang together. The good news is we are making robust progress. We think we are at the frontier there. And, you know, in all of these areas, when you look back in a 12-month basis, you end up making the models much more efficient for any given capability. So the forward-looking trajectory, I think, will really unlock these agentic experiences. We see the potential. We're able to do them, but they're a bit slow and costly and takes time and sometimes are brittle, right? But we're making progress on all of that.

Sundar Pichai: And I think that's what will really unlock, and I expect 2026 to be the year in which people kind of use agentic experiences more broadly, right? And so it's an exciting opportunity ahead.

Sundar Pichai: On the second part, I think when you say sources of internalization, I presume you're talking about how we are using all of this internally. You know, again, given you've asked a question about agents, we are now beginning to roll out agentic coding. journeys for our software engineers within the company. And it's been exciting to see just over the last few months and particularly over the last few weeks, people are definitely doing more agentic workflows in software engineering as well internally. And that's a good example of the kind of the same experience as a few months ago, had a lot of friction points, but we are overcoming it and people are beginning to use internally on the coding side, as well as in certain other areas of the company as well.

Sundar Pichai: So exciting progress. I expect it to be an active area where we will roll out journeys for our users as well. So look forward. Thanks Sundar, that's great.

Michael Nathanson: Our next question comes from Michael Nathanson with Muffet Nathanson. Your line is now open. Thanks Sundar, I have two for you. At I-O, you announced a partnership with Warby Parker to develop glasses.

Sundar Pichai: So I wonder if you share your view of how important a cycle of new devices will be to further scale AI, and do you envision a world in which the mobile phone is no longer central to our consumer experience? That's one. Secondly, how does Google search with AI mode usage differ versus Gemini standalone apps? I'm wondering, do you see any differences in usage or the types of consumers who go to the app versus who go to traditional search with AI? Thanks. Thanks, Michael. On the first thing, look, I think... Any time I.O. changes, you can drive new experiences, including on hardware experiences, too.

Sundar Pichai: So I think AI will particularly enable, we've long had the promise of glasses and other form factors. But, you know, I think AI will spur a whole new wave of innovation there. We are super excited about our investment in glasses and, you know, found the experiences have taken a dramatic step up compared to the last iteration. So I think it'll be an exciting new emerging category. But I still expect phones to be at the center of the experience, you know, for the next two to three years at least. And so I still think that's going to be phones would continue to be at the center of the consumer experience.

Sundar Pichai: But we are excited about the emerging categories as well.

Sundar Pichai: On your second question on AI mode versus Gemini standalone app, broadly. There are some use cases where you can get a great experience in both places. But there are use cases which are very specific. I think where the queries are information-oriented, but people really want to rely on the information. But I have the full power of AI. I think AI mode really shines in that. You can go there, and you know it's backed up. The Gemini models are using search deeply as a tool. And so it's all grounded in that search experience. And I think users are responding very positively to it.

Sundar Pichai: And whereas in the Gemini standalone app, you see everything from, people can have a long conversation or chat just trying to pass time, right? And in the Gemini app, you've seen early cases where people may get into it in a therapy-like experience, right? So these are all emerging experiences of what people do. And I think this is why I'm glad we have both surfaces and we can innovate in both of these areas. And of course, there'll be areas which will be commonly served by both applications. And over time, I think we can make the experience more seamless for our users.

Sundar Pichai: Thanks, Sundar.

Mark Shmulik: Our next question comes from Mark Shmulik with Bernstein. Your line is now open. Yes, thanks for taking the question.

Mark Shmulik: Sundar, it seems there's almost like a daily news report about, you know, the AI talent war and high-profile folks moving around, which is kind of like your perspective and how you think Google's been doing it, both kind of attracting and retaining key AI talent.

Sundar Pichai: And along the similar lines, how do we think about AI-related resourcing costs alongside kind of the step-up in capital investments required to go build for AI? Thank you. Mark, on the first question, look, I think, you know, we've gone through these moments before. We've obviously always deeply invested in talent, including in AI talent for well over a decade now. And I think we have an extraordinary both breadth and depth of the talent. In my experience, You know, the top people look for a combination of they want to really be at the frontier, driving progress. And so the mission and the and how state of the art your work matters.

Sundar Pichai: So that's super important to them, access to compute resources and access to your peers, right? Working with the best, best people in the industry. And it's a combination of all of that and using it to drive impact. And I think we are pretty competitive on all those fronts. And, you know, through through this moment, we continue to look at both our retention metrics as well as the new talent coming in. And both are healthy. You know, I do know individual cases can make headlines, but when we look at look at numbers deeply, I think we are doing very well through this moment.

Philipp Schindler: And we'll continue investing in the people and the talent and the compute needed to make sure we are set up for the opportunity.

Philipp Schindler: And maybe I'll pass it on.

Philipp Schindler: Yeah, the question on how we integrate this into our overall cost structure. And I've mentioned before having the benefit of having the full stack includes research, which is our people and one of our most critical resource. So we make sure that we invest appropriately to have the best, brightest minds in the industry sitting here at Google and advancing our innovation to customers. It is part of what you're seeing now in our operating expense line across the organization. But we're also working hard to offset not just growth and investment across the business, but also to ensure that we can allocate research appropriately.

Philipp Schindler: So Sunder mentioned earlier the use of AI tools within the company. So that's another area where we can drive efficiency across the business is to use these tools internally in terms of how we run the organization. And then we're continuing on the same efforts that I've talked about before with regards to running the company with a high level of discipline, execution and driving efficiency across the business.

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

Ross Sandler: If I can have two, that'd be great. So the first one's on search click-through rates as a driver of monetization. So you guys have done a great job over the past decade of driving better ad relevancy and higher click-through rates in search. Just curious, as we look forward and we see lower ad impressions per SERP and all these things that are changing with AI overviews and different AI search formats, how do you feel about your ability to drive CTR going forward?

Philipp Schindler: And then the second question is, it looks like you're now working with OpenAI for some aspect of cloud infrastructure. Just curious how that relationship might expand in the future. Thank you.

Philipp Schindler: I can make the first one. Look, specifically referring to the AR reviews, if I understood your question correctly, Sundar mentioned it. They continue to drive higher satisfaction. They continue to drive higher search users. They're scaling up very nicely. And they're actually working for our entire user base now, scaled to over 2 billion users in over 200 countries, so very happy with this development. But when it comes specifically to the monetization of it, we talked about it before. We see monetization at approximately the same rate, which gives us actually a really strong base on which we can then innovate and drive actually a more innovative and new and next-generation ad formats.

Philipp Schindler: That's how we look at it at this moment in time.

Philipp Schindler: For the second part, with respect to OpenAI, we're very excited to be partnering with them on Google Cloud. Google Cloud is an open platform, and we have a strong history of supporting great companies, startups, AI labs, etc. So super excited about our partnership there on the cloud side. And, you know, we look forward to investing more in that relationship and growing there.

Mark Mahaney: Our next question comes from Mark Mahaney with Evercore. Your line is now open. Okay, two questions, please.

Philipp Schindler: First, can you just describe maybe, Philipp, what you see in terms of the ad environment, maybe for the back half of the year, you know, maybe versus last year? Does it seem as, you know, certain or as uncertain as it was last year? The results seem pretty strong. Are there any, any, any unusual concerns you would have for the back half of the year?

Sundar Pichai: And then, Sundar, I want to ask you again about the two surfaces approach to search. And, you know, you obviously got some, you must have some internal metrics that tell you that that's, that that's the optimal way for you to approach the market. But, you know, there's, I'm sure there's a counter argument that just having that unified search and being able to discern the intent of the search, whether it's pure information or commercial, just from the query, that that could give you a material advantage over other offerings in the market. Just talk a little bit about what metrics you've seen that, that make it, that make the two surface solutions seem to be optimal.

Sundar Pichai: Thank you.

Philipp Schindler: So let me start. Look, we said our ad business performed strongly in Q2, give you maybe some vertical color of it. In Q2, search and other performance was led by growth across all verticals. We mentioned the largest contributions from retail and financial services, which was primarily due actually to strength and insurance. We saw healthcare as a sizable contributor to growth as well. Look, we're only a few weeks into Q3.

Sundar Pichai: So I think it's really too early to comment on anything happened in the second half of the year. And, Mark, on the second part of the question, look, I think... You know, between these two surfaces, you pretty much, you know, you're covering the entire breadth and depth of what, you know, humanity can possibly do. So I think there's plenty for two surfaces to tackle at this moment. Obviously, you know, you are right, you know, search is more information focused. And we think of the Gemini app as more your assistant, more personal, proactive and powerful assistant for every aspect of your daily life.

Sundar Pichai: And so you can imagine wanting to code deeply or create a long video, etc. Like, you know, those things can be done by the Gemini app today better.

Sundar Pichai: Over time, like we've always done, we've gone through these evolutions before. Like, as you point out, you know, we can understand user intent better and abstract some of the complexity for our users. At one point, people used to go to, you know, query separately for text, differently from images, differently from videos, etc. And we kind of made it all seamless with universal search. So we have the experience of being able to bring together experiences in a way that makes sense for users. And do the heavy lifting for them.

Sundar Pichai: But I think, you know, when you're in this early stage of new emerging paradigms, I think we want to make sure, you know, we can meet them where they're, what they are expecting today. And over time, I think it will give us an opportunity to serve them better.

Sundar Pichai: So I think that's how we are thinking about it. Okay, thank you.

Kenneth Gawrelski: Our next question comes from Ken Gawrelski with Wells Fargo. Your line is now open. Thank you very much.

Anat Ashkenazi: Two if I may, please. The first on cloud, I'm just hoping maybe you could clarify your back half outlook. Given last quarter, you talked about some supply constraints that would ease towards the end of 2025. But yet you put up a really nice acceleration in 2Q. Now you're talking about some supply constraints easing into 26. If you could just clarify a little bit on the back half outlook for cloud, given the strong results in 2Q.

Anat Ashkenazi: And then the second is a bigger picture question, which is an agentic experience. Does it democratize the web like search did two decades ago, enabling discovery in the long tail? Or does it lead to more concentration with a smaller group of vertical winners? Would love it if you could opine on that. Thank you. Okay, on your first question on the cloud second half outlook and the comments I previously made on, with regards to where we're going to see the capacity increase. So obviously, we're working hard to bring more capacity online, which means data centers and servers are coming online, and we see more of an increase towards the back end of the year.

Anat Ashkenazi: But we're increasing capacity with every quarter that goes by, as you can see with the growth rates we've had both this quarter and in the previous quarter. As Sundar mentioned earlier, this is not the type of investment that's a light switch. It takes time to make this investment. So what you're seeing now is investment we made some time ago that's now translating to additional capacity coming online, but more of that towards the back end of the year. I will say it's important as you think about cloud growth, not to think about this in a linear fashion, because the quarter and quarter growth rates could depend on the timing of capacity delivery and when that comes online.

Anat Ashkenazi: So that could move a little bit from quarter to quarter.

Anat Ashkenazi: on the on agentic experience. Okay, I think those earlier questions on the technology aspects of it and how we are making progress. Obviously, there's the value proposition for all the players involved. And I think that's going to be an equally important thing to create the unlock here. And I do think, you know, our time users will You know, it's clear to me, as we make progress on the agent experience, it's going to be a much better experience for users, right? And so you will find savvier players leaning into these experiences, and that will help them grow and meet this moment.

Anat Ashkenazi: And I think, so I do think it's an opportunity for some of the players. And so you are right, just like the early days of the web, there are aspects about it, which will expand access, grow the use cases, etc. And I think that elements are there, but I do think it's important. It's not just a technology play, but we have to solve the business models for the varying players involved. So I think that's going to be an important part of this evolution as well. Thank you.

Justin Post: And our last question comes from Justin Post with BAML. Your line is now open. Great. Thank you. A couple for Sundar. First, looks like the subscription businesses are all tracking well and, you know, certainly Gemini 2.5 has got some much good reviews. How are you doing with Gemini subscriptions? I know it's a focus area for the company. And anything you can kind of do to accelerate the consumer subscriptions of Gemini within Google One?

Sundar Pichai: And then secondly, just on the course change of CapEx, obviously a bigger increase, which appears to be because of cloud demand. But just your comments on Cloud ROI and, I'm sorry, CapEx ROI. What gives you confidence that you're going to get good returns on that spend? Thank you. Great. On the first thing, on subscriptions, you know, we've definitely, you know, Google One has been an attractive value proposition, powered by storage. But now, our AI plans, including both Pro and Ultra, and particularly with the 2.5 series of models, they've definitely seen accelerated traction. So it was a very healthy order.

Sundar Pichai: And so we are definitely excited about the opportunities ahead. And you will find, you know, through this moment, I think we'll be able to drive growth in that area, based on our AI offerings. And so it's definitely an area we are both excited by, and we are actually seeing traction, particularly in the last quarter, ever since we introduced 2.5 Pro. So we are excited about the trajectory there.

Sundar Pichai: On the CapEx, on the cloud side, look, I think we are definitely investing, because we are delivering a lot of value through our cloud offerings. And I think it's important to understand, you know, as we build more and more of an install base with Google Cloud, you know, we have very high customer satisfaction, our churn rates are very low, and we are much more efficient in the investments needed to grow those lines of businesses. So you're seeing all that play out in our margin trajectory, particularly if you look at it annually, sequentially, over the past few years.

Sundar Pichai: And so, and, you know, so all that gives us confidence as we are investing in this, you know, we will be able to have a healthy ROI on our investments. And particularly in this AI moment, you know, there's definitely the value we are delivering to the customers is also growing pretty significantly on a forward-looking basis. And so I think all that, you know, will help us, you know, do well here.

James Friedland: Thank you and that concludes our question and answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks. Thanks, everyone, for joining us today. We look forward to speaking with you again on our third quarter 2025 call. Thank you and have a good evening. Thank you, everyone.

James Friedland: This concludes today's conference call. Thank you for participating. You may now disconnect. , Microsoft Office Word Document MSWordDoc Word.Document.8

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