Q3 2025 Alphabet Inc Earnings Call

October 29, 2025

Standing by for the alphabet third quarter 2025 earnings conference call.

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

Ask a question during the session you will need to press star one on your telephone.

Speaker #8: La la la .

Speaker #9: Welcome , everyone . Thank you for standing by . For the alphabet . Third quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .

I would now like to hand, the conference over to your Speaker today, Jim Friedland head of Investor Relations. Please go ahead.

Thank you good afternoon, everyone and welcome to alphabets third quarter 2025 earnings conference call with US today are Sundar Pichai Philipp Schindler Ashkenazi now I'll quickly cover the safe Harbor.

Speaker #9: After the speaker presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one on your telephone .

Speaker #1: And . Three for the patient and and the . For any further process recommendation . Business writer for the rest of . The last year here you can also read our .

Speaker #9: I would now like to hand the conference over to your speaker today , Jim Friedland , Head of Investor Relations . Please go ahead .

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

Speaker #10: Thank you . Good afternoon , everyone , and welcome to Alphabet's third quarter 2020 earnings conference call . With us today are Sundar Pichai , Philipp Schindler and Anat Ashkenazi .

Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties actual results could differ materially. Please refer to our forms 10-K, and 10-Q, including the risk factors. We undertake no obligation to update any forward looking statement.

Speaker #10: Now , I'll quickly cover the safe harbor . Some of the statements that we make today regarding our business operations and financial performance may be considered forward looking .

Speaker #1: 20 . And our next question comes from Michael are coming on my screen right now . And . On that on that , on that .

Speaker #10: Statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties . Actual results could differ materially .

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.

Speaker #10: Please refer to our forms 10-K and 10-q , including the risk factors we undertake no obligation to update any forward looking statement . During this call .

Speaker #10: 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 .

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

Thank you Jim Good afternoon, everyone and thanks for joining US this was a terrific quarter for alphabet, driven by double digit growth across every major part of our business.

Speaker #10: Our comments will be on year over year comparisons unless we state otherwise . And now I'll turn the call over to Sundar .

We are seeing AI now driving real business results across the company.

Speaker #2: Thank you Jim . Good afternoon everyone , and thanks for joining us . This was a terrific quarter for alphabet driven by double digit growth across every major part of our business .

Speaker #1: We have compared . LaMDA . We have . Seen strong usage . On that and that again the average is . Family size to 20 .

We delivered our first ever $100 billion quarter <unk>.

Five years ago, our quarterly revenue was at 50 billion.

Our revenue number has doubled since then and we are firmly in the generative AI era.

Speaker #2: We are seeing AI now driving real business results across the company . We delivered our first $100 billion quarter five years ago . Our quarterly was at 50 billion .

In parallel we are built for the long term and diversified with successful businesses in cloud Youtube and subscriptions.

Our momentum is strong and we are shipping at speed.

Speaker #2: Our revenue number has doubled since then , and we are firmly in the generative AI era . In parallel , we have built for the long term and diversified with successful businesses in cloud , YouTube and subscriptions .

Just a few examples.

First party models like Gemini now processed 7 billion tokens permanent via direct API used by our customers.

Speaker #1: Yes . And the ROIC and ROIC and helps us to keep our business and these early signs are encouraging . Generating AI or AI .

The German App now has over 650 million monthly active users and query is increased by three X from Q2.

Speaker #2: Our momentum is strong and we are shipping at speed . As just a few examples , a first party models like Gemini now process 7 billion tokens per minute .

Cloud had on a great quarter of accelerating growth with the AI revenue is a key driver.

Speaker #2: We had direct API use by our . The Gemini app now has over 650 million monthly active users and queries increased by three x from Q2 .

Cloud backlog grew 46% quarter over quarter to $155 billion.

Speaker #1: AI . Road for valuation for . Our on Accenture we have 1,000,000 million in the cells that we meet . The demand for the the .

And we crossed 300 million paid subscriptions led by growth in Google, One and Youtube premium.

Speaker #2: Cloud had another great quarter of accelerating growth with AI revenue as a key driver . Cloud backlog grew 46% quarter over quarter to $155 billion , and we crossed 300 million paid subscriptions , led by growth in Google one and YouTube premium .

Today I'll discuss progress in our full stack approach to AI, and then share highlights from search cloud Youtube and BMO.

As a reminder, our full stack approach spans AI infrastructure World class research, including models and tooling and our products and platforms that bring AI to people everywhere.

Speaker #2: Today , I'll discuss progress in our full stack approach to AI and then share highlights from Search Cloud , YouTube , and Waymo .

Speaker #1: So we look at it approximate . So we evaluate those three , whether it's whether it is or whether it's a different data revenue generated from the same time in our business , in our to see the effect of our .

Speaker #2: As a reminder , our full stack approach spans AI infrastructure , world class research including models and tooling , and our products and platforms that bring AI to people everywhere .

First up AI infrastructure.

Our extensive unreliable infrastructure, which powers all of Google's product is the foundation of our stack and a key differentiator.

We are scaling the most advanced chips in our data centers, including Gpus from our partner Nvidia as well as our own purpose built tpu's.

Speaker #2: First up , AI infrastructure . Our extensive and reliable infrastructure , which powers all of Google's products , is the foundation of our stack and a key differentiator .

And we are the only company, providing a wide range of both.

Speaker #1: Google I/O on . Our . Exercisers as well . And YouTube . Our station or we make our decision . On . And that give us that a lot of given that and that the long term .

Speaker #2: We are scaling the most advanced chips in our data centers , including GPUs , from our partner Nvidia , as well as our own purpose built TPUs .

As we announced yesterday at Nvidia GTC, we are now shipping the new Forex Max instances powered by Nvidia GBP 300, who are cloud customers.

Speaker #2: And we are the only company providing a wide range of both . As we announced yesterday at Nvidia GTC , we are now shipping the new A4 x Max instances powered by Nvidia GPT 300 to our cloud customers .

Our highly sought after tpa portfolio is led by our seventh generation TPU, Ironwood, which will be generally available soon.

We are investing in TPU capacity to meet the tremendous demand, we're seeing from customers and partners and we are excited that anthropic recently shared plans to access up to 1 million Teus.

Speaker #2: Our highly sought after TPU portfolio is led by our seventh generation TPU Ironwood , which will be generally available soon . We are investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners , and we are excited that anthropic recently shared plans to access up to 1 million TPUs .

Speaker #1: Accenture . Our next question comes from . Barry . On average . So , so I'm , as I . For the ability to .

Next World Class AI research, including models and tooling.

Our models have world, leading Gemini 2.5 Pro V O G. III on a viral sensation nano banana are among the very best in class over 230 million videos have been generated with <unk> III and.

Speaker #2: Next world class AI research , including models and tooling . Our models are world leading Gemini 2.5 Pro three under viral sensation Nano Banana are among the very best in class .

And more than 13 million developers have built with our generator models.

We're looking forward to the release of Gemini three later this year.

Speaker #2: Over 230 million videos have been generated with veo , and more than 13 million developers have built with our generative models . We are looking forward to the release of Gemini three later this year .

Our research leadership is advancing next frontier technologies last week, we announced that our Willow quantum chip achieved a major breakthrough running an algorithm 13000 times faster than one of the world's best supercomputers.

Speaker #2: Our leadership is advancing next frontier Technologies . Last week , we announced that our Willow Quantum chip achieved a major breakthrough running an algorithm 13,000 times faster than the world's best supercomputers , and the result is verifiable , paving the way to future practical applications .

And the result is verifiable paving the way to future practical applications.

Speaking of quantum let me congratulate Michelle debris, our chief scientist for quantum hardware. He received a Nobel in physics for early research. He did in the 19 eighties three noble's awarded to current Googlers in two years incredible.

Speaker #1: Reach either international actually increased annual without a . Emergency . Sales . Annual sales . With some time to actually take to . Version the marginalization .

Speaker #2: Speaking of quantum, let me congratulate Michel Debra, our Chief Scientist for Quantum Hardware. He received a Nobel Prize in Physics for his early research.

Third our products and platforms, we are bringing AI to more people and developers than anyone else.

Speaker #2: He did in the 1980s , three nobles awarded to current Googlers in two years . Incredible . And third , our products and platforms .

In July we announced that we processed 980, Chilean monthly tokens across all our services. We are now processing over 1.3 quarterly and monthly tokens more than 20 X growth in a year phenomenal. This.

Speaker #2: We are bringing AI to more people and developers than anyone else . In July , we announced that we processed 980 trillion monthly tokens across all our services .

Speaker #1: Training . Interesting . Pretty interesting . Interesting . Creative work . I know that it is . I take AI will be . Using such to charge .

This quarter, we took big steps to re imagine chrome is a browser powered by AI through deep integrations, with Gemini and AI mold and search with more agent capabilities coming soon.

Speaker #2: We are now processing over 1.3 quadrillion monthly tokens , more than 20 x growth in a year . Phenomenal . This quarter we took big steps to reimagine Chrome as a browser powered by AI through deep integrations with Gemini and AI mode .

In August it made by Google, We unveiled our pixel 10 series of devices.

Speaker #1: You . And . To . Our next question comes from Ken Ross in your line . In . So thank you very much .

Speaker #2: In search with more Agentic capabilities coming soon . In August at Made by Google , we unveiled our pixel ten series of devices .

They are the first with our most powerful chip designed to run on Gemini tensor G. Five there are best reviewed devices ever and.

And last week, we launched Android XR, our new operating system that Samsung's Galaxy XR device.

It brings new ways to use headsets and classes with Gemini at the core.

Now turning to highlights from search.

Speaker #1: Thank you . Very . And thanks , I think and I think that one can , you know , I can , you know , not everyone can .

<unk> is driving an expansionary moment for search as people learn what they can do with our new experiences. They are increasingly coming back to search more search and it's a I experiences are built to highlight the web sending billions of clicks to sites every day.

During the Q2 call, we shared that overall Aquarius and commercial core is continuing to grow year over year.

This growth rate increase in Q3, largely driven by our AI investments in search most notably AI all of us and AI mode. Let.

Let me dive into the momentum we are seeing.

As we have shared before AI all of Us drive meaningful query growth. This effect was even stronger in Q3 as users continue to learn that Google can answer more of their questions.

And it's particularly encouraging to see the effect was more pronounced with younger people.

We're also seeing that AI mode is resonating well with users in the U S. We have seen strong and consistent week over week growth in usage since launch and quarry has doubled over the quarter.

Over the last quarter, we rolled out AI mode globally across 40 languages Center Court time. It now has over 75 million daily active users and we shipped over 100 improvements to the product Q3, an incredibly fast pace most.

Most importantly, AI motors already driving incremental total query growth for search.

Speaker #1: We are . Working toward . Anything to be seen in a way that actually . So Xcel Energy Management and the the so to the light at the you just wanted to make sure that we are meeting the you .

Philip will talk more about monetization and share how AI is helping people connect with businesses and shop on search.

Next Google cloud.

Our complete enterprise AI product portfolio is accelerating growth in revenue operating margins and backlog.

In Q3 customer demand strengthened in three ways. One we are signing new customers faster the number of new GCB customers increased by nearly 34% year over year.

Two we are signing larger deals we signed more deals over $1 billion through Q3. This year than we did in the previous two years combined.

Speaker #1: And Gemini and I and I think it . No . You need . A you know . Maybe . Imagine2 of information . About ActionScript and .

Third we are deepening our relationships.

We're 70% of the existing Google cloud customers use our AI products, including Banco BV Bestbuy and fair price group.

As we scale, we are diversifying revenue to date 13 product lines are each at an annual run rate or $1 billion.

And we are improving operating margin with highly differentiated products, both with their own technology.

This deep product differentiation starts with our AI infrastructure.

We have a decade of experience building AI accelerators and today offer the widest array of chips. This leadership is winning customers like HCA healthcare LG AI research and Macquarie Bank and its why nine of the top 10, AI Labs to school club.

Speaker #1: Our last question comes from Jennifer . Comes from . South . And innovation . City . And thanks for this one . I and I wanted to I actually .

We are also the only cloud provider offering our own leading generative AI models, including Gemini imagine Leo Chirp and Lydia.

Adoption is rapidly accelerating in Q3 revenue from products built on our generative AI models grew more than 200% year over year.

Over the past 12 months nearly 150, Google cloud customers each processed approximately one trillion tokens with our models for a wide range of applications. For example, W. P. P is creating campaigns with up to 70% efficiency gains.

Swarovski is increased email open rates by 17% and accelerated campaign localization by 10 times.

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Earlier this month, we launched Gemini enterprise, the new front door for AI in the workplace and we are seeing strong adoption for agents built on this platform our package enterprise agents in Gemini enterprise are optimized for a variety of domains are highly differentiated and offer significant out of box.

Over the past 12 months nearly 150, Google cloud customers each processed approximately one trillion tokens with our models for a wide range of applications.

For example, W. P. P is creating campaigns with up to 70% efficiency gains.

Value to customers.

Swarovski is increased email open rates by 17% and accelerated campaign localization, but 10 times.

We have already crossed 2 million subscribers across 700 companies.

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Next Youtube.

Earlier this month, we launched Gemini enterprise, the new front door for AI in the workplace.

In the living room Youtube has remained number one in streaming watch time in the U S for more than two years according to Nielsen.

And we are seeing strong adoption for agents built on this platform or.

Last month marked youtube's first time is alive NFL broadcaster. This exclusive global broadcast live from Brazil drew more than 19 million fans and set a new record for most concurrent viewers of a livestream on Youtube.

Our package enterprise agents in Gemini enterprise are optimized for a variety of domains are highly differentiated and offer significant out of box value to customers. We.

We have already crossed 2 million subscribers across 700 companies.

Youtube shorts also continues to perform well.

In the U S shots now earn more revenue per watch our than traditional in stream on Youtube.

Next Youtube.

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In the living room Youtube has remained number one in streaming watch time in the U S for more than two years according to Nielsen.

But I've made on Youtube event, we rolled out a number of AI powered features that are helping creators supercharged creation and build their businesses.

AI is now streamlining the enteric content creation workflow from generated video tools and more efficient editing to AI powered insights that help creators optimize their channels.

Youtube shorts also continues to perform well.

We're also using AI to expand monetization automatically identifying products to make their videos more shopper ball.

Speaker #1: Who's our question and answer that question , professor . Did you ever want . This ? Did you ever wanted this ? Thank you for participating .

In the U S shots now.

A new per watch our than traditional in stream on Youtube.

Philip will discuss in more detail.

Are made on Youtube event, we rolled out a number of AI powered features that are helping create a supercharged creation and build their businesses.

And finally Raimo next year Braemar aims to open service in London, and they are working to bring service to Tokyo.

They've also announced expansions to Dallas, Nashville, Denver, and Seattle and secured permission to operate fully autonomous Lee at San Jose and San Francisco airport's.

AI is now streamlining the entire content creation workflow to generate video tools and more efficient editing to AI powered insights that help creators optimize their channels.

Speaker #1: You . Thank you for . Coming here . From in our water and . I . Actually wish you and . Everybody . Recurrence or aggravation and recurrence for or civilization or any or any .

Anonymous testing continues to scale in New York City.

We're also using AI to expand monetization automatically identifying products to make their videos more shopper.

The new way more for business allows enterprises to offer via email as a work travel option.

Philip will discuss in more detail.

And we launched BMO teens accounts in Phoenix. This summer we are pleased to see usage steadily increase with positive feedback from teens and their parents alike.

And finally raimo.

<unk> aims to open service in London, and they are working to bring service to Tokyo.

They've also announced expansions to Dallas, Nashville, Denver, and Seattle and secured permission to operate fully autonomous Lee at San Jose and San Francisco airport's.

Most growth and momentum our strong and 2026 is shaping up to be an exciting year.

Overall, a milestone quarter the incredible work of our teams is driving momentum across the board and our leadership in AI positions us so well for the opportunity ahead.

Economists testing continues to scale in New York City.

The new way more for business allows enterprises for venmo as a work travel option.

Want to thank all of our partners and our employees for their hard work and an excellent Q3 with that I'll turn it over to Philip.

And we launched BMO teens accounts in Phoenix. This summer we are pleased to see usage surely increase with positive feedback from teens and their parents alike.

Thanks, Sundar and Hello, everyone.

Most growth and momentum our strong and 2026 is shaping up to be an exciting year.

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.

Overall, a milestone quarter the incredible work for our teams is driving momentum across the board and our leadership in AI positions us so well for the opportunity ahead.

Services revenues were 87 billion for the quarter up 14% year on year, driven by accelerated growth in search and Youtube, partially offset by year on year decline in network revenues.

Thank all of our partners and our employees for their hard work and excellent Q3.

Some further color to our results the 15% increase in search and other was led by growth across all major verticals with the largest contributions from retail and financial services.

With that I'll turn it over to Philip.

Thank you Sundar and Hello, everyone.

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

Our troops are similar performance across verticals, it's 15% growth in advertising revenues was driven by direct response, followed by brand.

Services revenues were 87 billion for the quarter up 14% year on year, driven by accelerated growth search and Youtube, partially offset by a year on year decline in net revenues.

Starting with search and other revenues, which delivered over 56 billion in revenue for the quarter.

As Saundra mentioned AI is driving an expansionary moment entrants, forming how people use Google search our investments in user experiences such as AI overviews and AI mode continue to drive growth in overall quarries, including commercial cores, creating more opportunities for monetization.

Some further color to our results.

8% increase in search and other was led by growth across all major verticals with the largest contributions from retail and financial services.

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Youtube saw similar performance across verticals, it's 15% growth in advertising revenues was driven by direct response, followed by brand.

These are experiences or enhancing how people connect with businesses and shop on search we recently added shopping capabilities in AI mode, which no help people shop conversation in search and we expanded try on capabilities to more clothing items now available to anyone in the U S. Lastly, we're making it easier for consumers to benefit from.

Starting with search and other revenues, which delivered over 56 billion in revenue for the quarter.

And Sundar mentioned AI is driving an expansionary moment entrants, forming how people use Google search and our investments in new experiences such as AI overviews and AI mode continue to drive growth in overall quarries, including commercial cores, creating more opportunities for monetization.

Speaker #1: And . Yes . Thank you . Thank you , everyone out here . For for your . I mean , I . Would to like to .

Deals through new loyalty offerings like personalized adaptations on organic results and ads.

Looking at the monetization businesses can now tap into our most powerful AI search experiences using.

These are experiences or enhance how people connect with businesses and shop on search we recently added shopping capabilities in AI mode, which no help people shop conversation in search and we expand the try on capabilities to more clothing items now available to anyone in the U S. Lastly, we're making it easier for consumers to benefit from.

Using our most advanced AI models, we can understand and predict intend like never before unlocking entirely new commercial pathways to provide valuable new consumer connections and helping us monetize even more efficiently.

<unk> rolled out globally in September IMAX and search is already used by hundreds of thousands of advertisers currently making it the fastest growing airport search ads product in Q3 alone the IMAX unlock billions of net new quarries.

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Through new loyalty offerings like personalized notations on organic results and ads.

Looking at monetization businesses can now tap into our most powerful AI search experiences.

By delivering the most relevant ad across surfaces and matching advertisers against additional Coors, there weren't reaching before.

<unk> helps advertisers discover new customers at the exact moment, they need their product or service.

Speaker #1: 100% growth rate of growth rate. Even though you may, you may, you can take your hands traditional and/or traditional. In order.

Cardiac for example look to grow conversions, while staying within their role West calls after turning on Amex and search they grew the conversion value by 12% in early tests.

<unk> rolled out globally in September IMAX and search is already used by hundreds of thousands of advertisers currently making it the fastest growing airports search ads product in Q3 alone IMAX unlock billions of net new quarries delivering the most relevant ad across surfaces and matching advertisers against that Macquarie as they were in <unk>.

We continue to infuse generate if AI capabilities at every step of the marketing process, we rolled out imaging for an asset studio in product studio, helping businesses produce more and better creators.

Speaker #1: Not revenue growth rate, but revenue. There is a significant difference. There is a significant difference to specific stimuli. Significantly, we made changes that will either remain intact or change.

<unk> before IMAX helps advertisers discover new customers at the exact moment, they need their product or service.

On the measurement front, we enriched the model supporting Meridian, a marketing mix model with additional variables.

Kayak for example look to grow conversions, while staying within their role West Scott's after turning on the IMAX and search they grew the conversion value by 12% in early tests.

And more granular reporting and P. Max is making bidding more effective.

Financial services companies. So far has been using <unk> to meet its ambitious growth targets and helped drive a 39% improvement in his conversion volumes year over year.

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We continue to infuse generate if AI capabilities at every step of the marketing process, we rolled out imaging for an attitude and product studio businesses produce more and better creators.

Moving to Youtube, where we saw accelerated revenue growth a recommendation systems are driving robust watch time growth in our key monetization areas like shorts and living room.

On the measurement front, we enriched the model supporting Meridian, our marketing mix model with additional variables.

As we leverage M&A models, we're seeing further discovery improvement on direct response, we're excited about the growth in revenue, we're seeing especially from small and medium advertisers adopting demand gen.

And more granular reporting and P. Max is making bidding more effective.

Financial services companies. So far has been using P. Max to meet its ambitious growth targets and helped drive a 39% improvement in its conversion volume year over year.

We also improved performance on dimension with over 100 launches, helping to increase conversion value by more than 40% for advertisers using target based bidding on Youtube.

Moving to Youtube, where we saw accelerated revenue growth a recommendation systems are driving robust watch time growth in our key monetization areas like shorts and living room.

The retail vertical continues to lead our growth on Youtube with demand in helping us further monetize shopping related categories.

Looking at the living room, a long term bet more advertisers are adopting interactive direct response ads, leading to an annual revenue run rate exceeding 1 billion globally for this format.

For our viewers, we continue to be a fence greater access across sports, while tapping into the best of Youtube product innovation and creator of that content sooner.

We also improved performance on dimension with over 100 launches, helping to increase conversion value by more than 40% for advertisers using target based bidding on Youtube. The retail vertical continues to lead our growth on Youtube with demand in helping us further monetize shopping related categories.

So as I mentioned that we expanded our NFL partnership with our first ever exclusive global broadcast of the NFL game brands loved the opportunity and be sold all our AD inventory within a couple of weeks.

Looking at the living room, a long term bet more advertisers are adopting interactive direct response ads, leading to an annual revenue run rate exceeding 1 billion globally for this format.

Looking at graders, a significant force behind the thriving Ugo creator economy is the collaboration between creators and brands.

Tools like direct linking to a dealer websites and shorts and swap blue brand segments in long form will soon he'll create a show or they deliver great value for brands.

Our view is we continue to grow fast greater access across sports, while tapping into the best of Youtube's product innovation and creator of that content Sundar.

<unk> through a collaboration with good perfect Comcast's Xfinity drove an 8% searched lift beating other xfinity adds republished on shorts by 34% at the same time it decreased the cost per listed user by 50% when compared to the next most efficient pad.

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Looking at graders.

And if you can force behind the thriving Youtube creator economy is the collaboration between creators and brands.

We continue to invest in AI powered features that are holding greater supercharged creation and build their businesses with views of the integration and speech to song Greater school from idea to iteration quicker and new channel insights help them better understand performance.

Truth like direct linking to build websites and shorts and swap all brand segments and long form will soon help creators show how they deliver great value of our brands.

<unk> through a collaboration with Duke perfect Comcast's Xfinity drove an 8% search lift beating other Xfinity adds recall lift on shorts by 34% at the same time it decreased the cost per lifted user by 50% when compared to the most efficient pad.

Ending on Youtube with our subscriptions product. We're also seeing momentum with strong growth in offerings, such as Youtube music and premium and Youtube TV.

We're also applying Gemini internally to help us serve customers with increased speed intelligence and efficiency our.

We continue to invest in AI powered features that are helping creators supercharged creation and build their businesses with view three integration and speech to song greatest go from idea to iteration quicker and new channel insights help them better understand performance.

Our sales teams use Gemini enriched with ads knowledge to streamline customer interactions. This increased productivity by over 10% led to hundreds of millions in incremental revenue and freeze ups first to engage with more customers at a deeper more strategic level.

Speaker #1: In the afternoon . I have to . Leave you AI party variants of AI powered immediately powered by by . Powered by . One .

Ending on Youtube with our subscriptions product. We're also seeing momentum with strong growth in offerings, such as Youtube music and premium and Youtube TV.

In our customer support Division Gemini powered solutions have managed over 40 million customer session. So far this year and resolved hundreds of thousands of customer inquiries and we're just getting started.

We're also playing Gemini internally to help us serve customers increased speed intelligence and efficiency our.

As always a rep with the progress we're seeing across partnerships, where our customers tap into the strength and breadth of google's products to accelerate the transformation.

Our sales teams use Gemini enriched with ads and all of us to streamline customer interactions. This increase productivity by over 10% led to hundreds of moving to an incremental revenue and frees up dollars to engage with more customers at a deeper more strategic level.

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Revolute, the global financial services Company, Leverages, Google clouds vertex AI platform in Gemini models to help power its advanced customer service chatbot develop new hyper personalized financial product and offer predictive insights.

And our customer support Division Gemini powered solutions have minutes 40 million customer sessions. So far this year and resolved hundreds of thousands of customer inquiries and we're just getting started.

Revenue is also increasing its presence on Youtube adopting video three for personalized creative making Google the key adds partner for delivering growth and launching new markets in closing I'd like to thank googlers everywhere for their contributions to our success and as always to our customers and partners for their continued trust and of course you.

As always I'll wrap with the progress we're seeing across partnerships, where our customers tap into the strength and breadth of google's products accelerated transformation.

Revolute, the global financial services company leveraged as Google clouds vertex AI platform in Gemini models to help power its advanced customer service chatbot develop new hyper personalized financial product and offer predictive insights.

Thanks to all of you as we celebrate 25 years of Google as well not over to you.

Thank you Phil My comments will focus on year over year comparisons for the third quarter, unless I state otherwise I will start with the results at the alphabet level and will then cover our segment results.

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Revenue is also increasing its presence on Youtube adopting views for you for personalized creative you can Google the key adds partner for delivering growth and launching new markets.

In closing I'd like to thank Googlers everywhere for their contributions to our success and as always to our customers and partners for their continued trust and of course, a huge thanks to all of you as we celebrate 25 years of Google ads are not over to you.

I'll end with some commentary on our outlook for the fourth quarter of 2020 five.

We had an outstanding quarter in Q3, continuing the strong momentum we've had throughout the year delivering double digit revenue growth across search and Youtube advertising subscriptions platforms and devices and Google cloud.

Thank you Phil My comments will focus on year over year comparison for the third quarter unless I state otherwise.

Consolidated revenue reached $102 $3 billion.

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 fourth quarter of 2025.

16% year over year increase or 15% in constant currency.

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Total cost of revenue was $41 $4 billion up 13%.

We had an outstanding quarter in Q3 continued the strong momentum we've had throughout the year delivering double digit revenue growth across search and Youtube advertising subscriptions platforms and devices and Google cloud.

<unk> was $14 9 billion up 8%.

Other cost of revenues was $26 5 billion up 16% with the increase primarily driven by content acquisition costs largely for Youtube all by depreciation and other technical infrastructure operations cost.

Consolidated revenue reached $102 3 billion.

16% year over year increase or 15% of U S currency.

Total operating expenses increased 28% to $29 7 billion.

Total cost of revenue was $41 $4 billion up 13%.

R&D expenses increased by 22% driven by compensation depreciation expenses related to our AI efforts.

<unk> was $14 9 billion up 8%.

Other cost of revenues was $26 5 billion up 16% with the increase primarily driven by content acquisition costs largely for Youtube, followed by depreciation and other technical infrastructure operations cost.

Sales and marketing expenses were flat and G&A expenses increased meaningfully primarily due to the $3 $5 million charge related to the European Commission Fine mentioned in the earnings press release.

Speaker #1: One . Will be two . One . Nine . The same time . The time . Number of custom . Number of changes .

Operating income increased 9% this quarter to $31.2 billion and operating margin was 35%.

Total operating expenses increased 28% to $29 7 billion R&D expenses increased by 22% driven by compensation and depreciation expenses related to our AI efforts.

Excluding the EC fine operating income increased 22% and operating margin was 33, 9%.

Marketing expenses were flat.

Operating margin benefited from strong revenue growth and continued efficiencies in our expense base offset by the legal charge and a significant increase in depreciation expense.

G&A expenses increased meaningfully primarily due to the $3 $5 million charge related to the European Commission Fine mentioned in the earnings press release.

Other income and expenses was $12 8 billion, primarily due to unrealized gains in our non marketable equity securities portfolio.

Operating income increased 9% this quarter, just $31.2 billion and operating margin was three 5%.

Net income increased 33% to $35 billion and earnings per share increased 35% to $2.87.

Excluding the EC fine operating income increased 22% and operating margin was 33, 9%.

Operating margin benefited from strong revenue growth and continued efficiencies in our expense base I'll say about the legal charge and a significant increase in depreciation expense.

We generate free cash flow of $24 $5 billion necessary corner and $73 $6 billion for the trailing 12 months.

Other income and expenses was $12 $8 billion, primarily due to unrealized gains in our non marketable equity securities portfolio.

Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes regarding the timing of when research and development costs are expensed and assets are depreciated. This was partially offset by higher capex.

Net income increased 33% to $35 billion and earnings per share increased three 5% to $2.87.

We ended the quarter with $98 $5 billion in cash and marketable securities.

We generate free cash flow of $24 $5 billion necessary corner and $73.6 million for the trailing 12 months.

Turning to segment results, Google services revenues increased 14% to $87.1 billion, reflecting strength in Google search Youtube advertising and subscriptions.

Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes guardians.

Search and other advertising revenues increased by 15% to 56 $6 billion.

Guardian of the timing of when research and development costs are expensed and assets are depreciated.

This was partially offset by higher capex.

<unk> another robust quarter with continued growth across all major verticals with the largest contributions from retail and financial services.

We ended the quarter with $98 $5 billion in cash and marketable securities.

Turning to segment results, Google services revenues increased 14% to $87.1 billion, reflecting strength in Google search Youtube advertising and subscriptions.

Youtube advertising revenues increased 15% to $10.3 billion driven by direct response advertising followed by brand.

<unk> advertising revenues of $7.4 billion were down 3%.

Google search and other advertising revenues increased by 15% to $56 $6 billion, representing another robust quarter with continued growth across all major verticals with the largest contributions from retail and financial services.

Subscription platforms and devices revenues increased 21% this quarter to $12 $9 billion, driven by very strong growth in both Youtube and Google ones subscriptions.

Google services operating income increased 9% to $33 $5 billion offer.

Youtube advertising revenues increased 15% to $10.3 billion driven by direct response advertising followed by Brent.

Operating margin declined year over year to 38, 5% is healthy revenue growth and continued efficiencies in our expense base were offset by the impact of the EC fine, which was fully reflected in the Google services segment.

Network advertising revenues of $7.4 billion were down 3%.

Subscriptions platforms and devices revenues increased 21% this quarter to $12 $9 billion, driven by very strong growth in both Youtube and Google one subscriptions.

Turning to the Google Cloud segment, which again delivered very strong results. This quarter as cloud continues to benefit from our enterprise AI optimized stack, including our own custom Gpus and our industry, leading AI models.

Services operating income increased 9% to $33 $5 billion.

Cloud revenue increased by 34% to $15 $2 billion into third quarter, driven by strong performance in GCB, which continued to grow at a rate that was much higher than clouds overall revenue growth rate.

G C piece growth was driven by enterprise AI products, which are generating billions in quarterly revenue.

Turning to the Google Cloud segment, which again delivered very strong results. This quarter as cloud continued to benefit from our enterprise AI optimized stack, including our own custom tpu's and our industry, leading AI models.

We had strong growth in enterprise infrastructure, and enterprise AI solutions, which benefited from demand for our industry, leading models, including Gemini 2.5.

Cloud revenue increased by 34% to $15.2 billion in third quarter, driven by strong performance in G. C. P, which continued to grow at a rate that was much higher than clouds overall revenue growth rate.

Core D. C. P was also a meaningful contributor to growth.

And we had double digit growth in workspace, which was driven by an increase in average revenue per seat and the number of seats.

G C piece growth was driven by enterprise AI products, which are generating billions in quarterly revenue.

Cloud operating income increased by 85% to $3 6 billion and operating margin increased from 17, 1% in the third quarter last year to 23, 7% this quarter.

We had strong growth in enterprise, the infrastructure and enterprise AI solutions, which benefited from demand for our industry, leading models, including Gemini 2.5.

The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base.

Core G. C. P was also a meaningful contributor to growth.

And we had double digit growth in workspace, which was driven by an increase in average revenues per seat and the number of seats.

Partially offset by higher technical infrastructure usage costs, which includes depreciation expense and other operations costs such as energy.

Cloud operating income increased by 85% to $3 6 billion and operating margin increased from 17.1% in the third quarter last year to 23, 7% this quarter.

Google Cloud backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter.

The increase was driven primarily by strong demand for enterprise AI.

The expansion in cloud operating margin was driven by strong revenue performance and continued efficiencies in our expense base.

And I mentioned earlier cloud has signed more billion dollar deals in the first nine months of 2025 than in the past two years combined.

Partially offset by higher technical infrastructure usage cost, which includes depreciation expense and other operations costs such as energy.

In other bets revenues were $344 million in operating loss was 1 billion four in the third quarter.

Google clouds backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter.

Within other bets, we continue to allocate more resources to businesses like Weymer, where we see opportunities to create substantial value.

The increase was driven primarily by strong demand for enterprise AI.

With respect to Capex in the third quarter, our Capex was $24 billion. The vast majority of our Capex was invested in technical infrastructure with approximately 60% of that investment in servers, and four 8% and data centers and networking equipment.

And I mentioned earlier cloud has signed more billion dollar deals in the first nine months of 2025 than in the past two years combined.

In other bets revenues were $344 million.

Operating loss was 1 billion for the third quarter.

In Q3, we returned capital to shareholders through repurchases of stock of $11.5 billion in dividend payments of $2 5 billion.

Within other bets, we continued to allocate more resources to businesses like Weymer, where we see opportunities to create substantial value.

Turning to our outlook I would like to provide some commentary on factors that will impact our business performance in the fourth quarter of 2025 as well as an updated outlook for Capex for the year first in terms of revenues. We're pleased with the overall momentum of our business at the current spot rates, we could see an FX tailwind to revenues in Q4.

In Q3 were returned capital to shareholders through repurchases of stock of $11.5 billion and dividend payments of $2 5 billion.

Sure.

However, the volatility in exchange rates could affect the impact of FX on Q4 revenues.

As far as segments in Google services year over year comparisons and advertising will be negatively impacted by the strong spend on U S elections in the fourth quarter of 2024, particularly on Youtube.

Turning to our outlook I would like to provide some commentary on factors will impact our business performance in the fourth quarter of 2025 as well as an updated outlook for Capex for the year first in terms of revenues. We're pleased with the overall momentum of our business at the current spot rates, we could see an FX tailwind to revenues in Q4.

In cloud demand for our products remains high as evidenced by the accelerating revenue growth and a $49 billion sequential increase in cloud backlog in Q3.

Sure.

However, the volatility in exchange rates could affect the impact of FX on Q4 revenues.

And G. C. P. We see strong demand for enterprise via infrastructure, including Tpu's N. G. P is.

As far as segments in Google services year over year comparisons and advertising will be negatively impacted by the strong spent on U S elections in the fourth quarter of 'twenty 'twenty four particularly on Youtube.

Enterprise AI solutions, driven by demand for Gemini 2.5, and our other AI models and core G. C P infrastructure and other services, such as cyber security and data analytics.

In cloud demand for our products remains high as evidenced by the accelerating revenue growth and then $49 billion sequential increase in cloud backlog in Q3.

As I've mentioned on previous earnings calls, we have been working hard to increase capacity and have improved the pace of server deployments and data center construction.

In GCB, we see strong demand for enterprises, the infrastructure, including Tpu's N. G. P is.

We still expect to remain in a tight demand supply environment in Q4 and 2026.

Enterprise AI solutions, driven by demand for Gemini 2.5, and our other AI models.

Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from cloud customers as well as the growth opportunities we see across the company.

<unk> G C P infrastructure and other services, such as cyber security and data analytics.

We now expect capex to be in the range of $91 billion to 93 billion in 2025 up from our previous estimate of $85 billion.

The previous earnings calls, we have been working hard to increase capacity and have proved that pace of server deployment and data center construction.

Keeping in mind that the timing of cash payments can cause variability in our reported capex number.

We still expect to remain in a tight demand supply environment in Q4 and 2026.

Looking out to 2020 six we expect a significant increase in Capex and we will provide more detail on our fourth quarter earnings call.

Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from cloud customers as well as the growth opportunities we see across the company.

In.

MS of expenses first as I've mentioned on previous earnings calls the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expenses and related data center operations costs, such as energy and.

We now expect capex to be in the range of $91 billion to 93 billion in 2025 up from our previous estimate of $85 billion.

Keep in mind that the timing of cash payments can cause variability in the reported number.

In the third quarter of depreciation increased $1 6 billion year over year to $5 $6 billion, reflecting a growth rate of 41%.

Looking out to 2026 do you expect a significant increase in Capex and we will provide more detail on our fourth quarter earnings call.

Given the overall increase in Capex investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

Yeah.

In terms of expenses.

First as Ive mentioned on previous earnings calls the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expenses and related data center operations costs, such as energy and.

Second we expect sales and marketing expenses to be more heavily weighted to the end of the year in part to support product launches and the holiday season.

Q3 was a strong quarter and we're excited with the adoption of our AI products helped by our rapid pace of innovation and great execution by our teams. This.

In the third quarter of depreciation increased $1 6 billion year over year to $5 $6 billion, reflecting a growth rate of 41%.

This translated into strong momentum in search Youtube AD subscription platforms and devices and cloud, resulting in our first 100 billion dollar plus quarter.

The overall increase in Capex investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

Second we expect sales and marketing expenses to be more heavily weighted to the end of the year in part to support product launches and the holiday season.

Now as Sundar, Philip and I will now 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's been stated.

Q3 was a strong quarter and we're excited with the adoption of our AI products helped by our rapid pace of innovation and great execution by our teams.

Our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

This translated into strong momentum in search, YouTube ads, subscription platforms, devices, and cloud, resulting in our first $100 billion plus quarter.

Great. Thanks for taking my questions everyone. The first one maybe for for Philip or Sungard's on agenda E. Commerce. The advent of travel there is a lot of external wall Street discussion about agenda ecommerce, but that'd be monetizing at a lower rate than search.

Now Sundar, Philipp, and I will take your questions.

Thank you.

The question is what factors are you most focused on to sort of ensure a smooth transition for your search business and for your advertisers as you move over to a more authentic world.

And the second one is on doors on Weibo how.

How far are we from an integration of weibo into more of the core Gemini capabilities and the users of the platform you're taking your user data.

What hotel I'm, staying at what airport I'm, saying that in half.

Think of it that into Weibo.

I should have users use their profile, it's a pre scheduled weibo's how far off is that what do we have to do.

Brian Great question. This is all early but we see identic experiences really is additive to the way people seek information. It helps us answers people, it's tough questions that helps us.

It helps people get stuffed on it helps businesses in the process and we're working on multiple agenda experiences across key verticals, such as travel commerce shopping and so on.

And we're putting a lot of attention.

This user experience, but also to the fact that we need to integrate different partner ecosystems in a way that it creates value for them and by the way. We're also working closely with a lot of our partners on the other side throw a cloud services to improve their own gen take our experiences and so maybe we go a little deeper on the shopping side.

We actually use AI already very actively to improve the shopping experience as you know we launched a more visual experience on AI mode and that gives people a much more intuitive conversational way to shop.

You can simply describe what youre looking for now like the way you would talk to a friend and we'll show you. The visual shopping results and then we think about building into Jetblue Identic shopping future and it has to be one again that benefits both use us.

Merchants here and you know that at all we also introduced new genetic checkout, which will let shoppers use our agenda AI to buy products or merchant sites and so on we.

We have a partnership with Paypal to help merchants build agenda commerce experiences, we have a new protocol for agent agent transactions and so on its own.

And Brian on Weibo.

Great question was reflecting I think on the exact same topic.

I'm scheduled to meet with the team to do a review on it in a few weeks out.

Look it is an exciting time way more clearly you know scaling up particularly in 2026.

And I think the possibility is he said of.

Jim and I, particularly with the multimodal experience as well as services like Youtube I think theres, a real opportunity to make the in car experience dramatically better.

Currently something we're excited about and you'll see newer experiences in in 2026 for sure.

Great. Thank you both.

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

Thanks for taking the questions.

So if you can just talk more about.

The drivers of our core search strength in I guess in particular, when you think about AI overviews and AI mode. We know the query growth is accelerating but can you help us understand from there kind of what happens in terms of clicks per query and conversion rates and pricing in these AI driven search formats and then.

And.

Can you talk about where you see opportunities in the core cost base as you work to make room to absorb the rapid growth and infrastructure and depreciation going forward.

So.

If he can give you a bit of vertical color first in Q3 three.

<unk> search and other revenues again delivered growth across all major vertical as we said it.

It was from retail and financial services and health care was also a contributor to the growth here.

Our new AI experiences you mentioned or reviews are mode continued to drive growth in overall quarries, including commercial Tories are really creating more opportunities for monetization.

So scaling up and are working for our entire user base, where else get it over 2 billion users here and we're continuing to expand ads overviews in English to more countries across desktop mobile and so on and as I've shared before for overviews, even at our current baseline of ads.

Hello, and within D. S response overall, we see the monetization at approximately the same rate. So over time, we're excited about the opportunity of a richer experiences in AI mode NAA overviews to basically open up then the opportunity for all so much richer placement.

Placements and.

I think as I've said on a prior call we manage the business to drive great outcomes for our users and an attractive ROI for our advertisers we do.

Not really manage to paid clicks and CPC targets.

But as you will see in the 10-Q paid clicks were up 7% year on year and species were up 7% year on year.

Doug to your question around where else can we see more opportunity for efficiency and productivity and I think you've heard me say before this is not a one time type of effort, but rather an ongoing way in which we manage the business and the key here is that the more we drive productivity across our business. The more we can invest.

And that business for growth and obviously continue to.

Drive improvement in the P&L some of the areas or things that you've heard us talk about in the past such as moderating the pace of headcount growth optimizing our real estate footprint, but also as we invest more and more in our technical infrastructure, ensuring that we are optimizing that build out and the overall tech.

Infrastructure, we have you know that a lot of the data centers for example that we build ourselves. So there are optimized and we make sure we do them in the most efficient way sooner.

Sundar mentioned and a lot of the previous calls the productivity associated with leveraging AI for Google. So it is the example, the the percent of code now nearly half of all cold generated by AI, that's a way for us to leverage AI to drive further productivity.

Across the business.

And obviously, we always look at making sure that when we provide services or products that we get the right economics and the right value for what we provide so the one. Good example is shorts, which has a lower revenue share then in stream.

That helps to improve some of our gross margin. So this is an effort we have ongoing I've mentioned in the past that we have a headwind with depreciation obviously, increasing alongside our capex increase over <unk>.

We have efforts across the organization to ensure we run the business in the most disciplined a productive way, while continuing to invest for future growth.

Thank you Bob.

Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

Thank you so much for taking the questions maybe two if I could so now when you think about your custom silicon efforts across the organization can you reflect a little bit about the opportunity set you see with each passing generation of custom silicon both in terms of driving operating efficiencies inside the organization and potentially.

Increased monetization efforts around those outside of the organization.

Second question would be for Philip.

We can see the Youtube advertising revenue number in our reported results can you reflect a little bit about the scaling of the subscription side of Youtube offerings and how the two parts together represent an interesting framework and thinking about the monetization side of Youtube.

Simply being a mix of both ads and subscription thank you.

Eric.

Core all I would say we are seeing substantial demand for our AI infrastructure products, including TPU based on GPU based solutions.

Is one of the key drivers of our growth over the past year and I think on a going forward basis.

We continue to see very strong demand and we are investing to meet that.

I do think a big part of what differentiates Google cloud are.

Effectively we are the you know we've taken a full the full stack approach to AI.

So we are in and that really plays out right. We are the only hyper scaler, who is really building offerings on our own models.

James Friedland: Welcome, everyone. Thank you for standing by for the Alphabet Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. I would now like to hand the conference over to your speaker today, James Friedland, Head of Investor Relations. Please go ahead.

And B B. It also highly differentiate it on our own technology. So to your question I think that does.

You know give us the opportunity to continue.

Driving growth and operating margins in cloud as we've done in the past.

And also I think from a revenue.

Philipp Schindler: Thank you. Good afternoon, everyone, and welcome to Alphabet Inc.'s Third Quarter 2025 Earnings Conference Call. With us today are Sundar Pichai, Philipp Schindler, and Anat Ashkenazi. Now, I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our Forms 10-K and 10-Q, including the risk factors. We undertake no obligation to update any forward-looking statement. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website located at abc.xyz/investor.

Sets the infrastructure portion of our business.

To be Adobe a growth driver looking ahead as well.

And to the second part of your question look just taking a quick step back you know, we often describe youtube's business as a flywheel. Obviously at first of all starts with the creators and we have significantly invested here to be the place that Youtube creators really call their home. That's a big piece of it are the number one piece viewers of course, our Youtube as billions of monthly logged in users.

And everyday people watch billions of hours of video and we've talked about how our recommendation system. So driving a robust much time growth and so on and so on so on the monetization side Youtube's business is really part of what's in it let's call. It a twin engine monetization strategy, combining its advertising business and it's growing cepstrum subscription services both.

Youtube ads and subscription saw strong growth this quarter and so looking at Youtube music and premium.

Those are on average delivering more value to creators to music media partners and Youtube itself, then even AD supported use us do so in other words on average of Youtube music and premium subscribers generates meaningful higher gross profit.

Philipp Schindler: Our comments will be on year-over-year comparisons unless we state otherwise. I'll turn the call over to Sundar.

[Analyst]: Thank you, Jim. Good afternoon, everyone, and thanks for joining us. This was a terrific quarter for Alphabet Inc., driven by double-digit growth across every major part of our business. We are seeing AI now driving real business results across the company. We delivered our first-ever $100 billion quarter. Five years ago, our quarterly revenue was at $50 billion. Our revenue number has doubled since then, and we are firmly in the generative AI era. In parallel, we have built for the long term and diversified with successful businesses in Cloud, YouTube, and subscriptions. Our momentum is strong, and we are shipping at speed. As just a few examples, our first-party models like Gemini now process 7 billion tokens per minute via direct API use by our customers. The Gemini app now has over 650 million monthly active users, and queries increased by 3x from Q2.

And then they were simply an AD supported users and fans coming from all over the world.

And this engagement into ads and subscription generates youtube's revenues and funds what I started with Eddie's creators here in the second drives more viewership and engagement and so on and that's the flywheel and so our priority continues like this growth cycle, we're happy with this twin engine monetization strategy.

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

Yes, thanks for taking the questions Sundar I want to start with adoption of Gemini Milligan overviews across the user base are there any meaningful differences to call out kind of around the behavior and depth of engagement for those users across the entire Google ecosystem.

And then Philip I know you kind of asked this.

In most quarters, but I'm curious kind of what some of the adoption you've seen around AI overviews and mode. How you see the economics of search evolving with the higher commercial in total query volume and how it kind of compares against the incremental cost to deliver these results. Thank you.

[Analyst]: Cloud had another great quarter of accelerating growth with AI revenue as a key driver. Cloud backlog grew 46% quarter over quarter to $155 billion. We crossed 300 million paid subscriptions led by growth in Google One and YouTube Premium. Today, I'll discuss progress in our full-stack approach to AI and then share highlights from Search, Cloud, YouTube, and Waymo. As a reminder, our full-stack approach spans AI infrastructure, world-class research, including models and tooling, and our products and platforms that bring AI to people everywhere. First up, AI infrastructure. Our extensive and reliable infrastructure, which powers all of Google's products, is the foundation of our stack and a key differentiator. We are scaling the most advanced chips in our data centers, including GPUs from our partner NVIDIA, as well as our own purpose-built TPUs. We are the only company providing a wide range of both.

Mark look I think obviously AI all of US are a natural part of our global experience and so you know engagement is very very high.

I'd say AI them. All you you'll have a varied cohorts that are people who are casual users who are checking it out and then but there's a core group, which which really likes a mold and dispassionate about it and so you see the early adopters are.

You know the product is resonating very strongly and they're seeking it out. So I think I think that's how I would highlight the difference with Gemini again.

Set of engaged user base, who are seeking out the product and so on but across the board I think.

The trajectory has been we are we are definitely seeing in each of those use cases, a set of early adopters and then more people coming in and the people who are using it continue to use it more or time and report high user satisfaction. So I would say the underlying product metrics are pretty encouraging to see.

[Analyst]: As we announced yesterday at NVIDIA GTC, we are now shipping the new A4x Max instances powered by NVIDIA GB300 to our Cloud customers. Our highly sought-after TPU portfolio is led by our seventh-generation TPU, Ironwood, which will be generally available soon. We are investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners, and we are excited that Anthropic recently shared plans to access up to 1 million TPUs. Next, world-class AI research, including models and tooling. Our models are world-leading. Gemini 2.5 Pro, Veo, Genie 3, and our viral sensation Nano Banana are among the very best in class. Over 230 million videos have been generated with Veo 3, and more than 13 million developers have built with our generative models. We are looking forward to the release of Gemini 3 later this year. Our research leadership is advancing next frontier technologies.

See as well.

Looking to the second part of your question I think we covered before sooner cover the core development and as I've, just said before for the overviews, even at our current baseline of apps right whether above below and within the response overall, we see the monetization at approximately the same rate and this is a great best baseline for.

Further innovation we've.

We talked about this we're excited about where this can go and on the AMOLED side, we're testing as an error mode and we will continue to test and learn before we expand this any further.

So it is in combination with what we mentioned about the commercial Cory overall development.

I think we're in a we're in a good place here.

You could also argue that inquiries that historically have not been well monetized. We think there is a potential opportunity here.

[Analyst]: Last week, we announced that our Willow quantum chip achieved a major breakthrough, running an algorithm 13,000 times faster than one of the world's best supercomputers. The result is verifiable, paving the way to future practical applications. Speaking of quantum, let me congratulate Michel Debray, our Chief Scientist for Quantum Hardware. He received a Nobel in Physics for early research he did in the 1980s. Three Nobels awarded to current Googlers in two years. Incredible. Third, our products and platforms. We are bringing AI to more people and developers than anyone else. In July, we announced that we processed 980 trillion monthly tokens across all our surfaces. We are now processing over 1.3 quadrillion monthly tokens, more than 20x growth in a year. Phenomenal.

Where you can obviously imagine that we can build this out with smart AI integration.

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

Thanks <unk>.

One for Gil.

It's clear that when people use AI query.

Query language is much longer and you talk about how that longer length, maybe impacting your ability to drive ROE ads and what youre seeing in some of the early.

The benefits of maybe a longer clearly ramping in.

<unk>.

The alphabet from a pharmaceutical company, who had been there more than in the year and talk a bit about how you're working to look at ROIC internally on what early signs are you seeing that gives you confidence that the spending is.

Diving better returns longer term thanks.

[Analyst]: This quarter, we took big steps to reimagine Chrome as a browser powered by AI through deep integrations with Gemini and AI mode in Search, with more agentic capabilities coming soon. In August, at Made by Google, we unveiled our Pixel 10 series of devices. They are the first with our most powerful chip designed to run on Gemini Tensor G5. They're our best-reviewed devices ever. Last week, we launched Android XR, our new operating system, with Samsung's Galaxy XR device. It brings new ways to use headsets and glasses with Gemini at the core. Now turning to highlights from Search. AI is driving an expansionary moment for Search. As people learn what they can do with our new AI experiences, they are increasingly coming back to Search more. Search and its AI experiences are built to highlight the web, sending billions of clicks to sites every day.

As Sundar shared.

<unk> has over like 75 million daily active users in the U S and we see strong and consistent week over week growth in usage.

Since launch and inquiries are doubled over the quarter.

And as I also mentioned, we're testing ads in AI mode. We will continue to list our test it before we expand any further it's really too early to tell and go into any of the details of that testing.

Okay, Yes, and the question related to auto I see in how we look at.

Just overall, our business and where do we see early signs are encouraging so firstly I would say it's not just early signs because we're seeing returns obviously in the cloud business you've heard us talk about the fact that we already are generating billions of dollars from AI in the quarter.

But then across the board, we have a rigorous framework and approach by which we evaluate.

These long term investments that are meant to do two things one is to ensure we have we built a resilient growth profile for the company, but also that we meet the demand of the customers that we have here in the in the more near and midterm.

[Analyst]: During the Q2 call, we shared that overall queries and commercial queries continue to grow year over year. This growth rate increased in Q3, largely driven by our AI investments in Search, most notably AI overviews and AI mode. Let me dive into the momentum we are seeing. As we have shared before, AI overviews drive meaningful query growth. This effect was even stronger in Q3 as users continue to learn that Google can answer more of their questions. It is particularly encouraging to see the effect was more pronounced with younger people. We're also seeing that AI mode is resonating well with users. In the U.S., we have seen strong and consistent week-over-week growth in usage since launch, and queries doubled over the quarter. Over the last quarter, we rolled out AI mode globally across 40 languages in record time. It now has over 75 million daily active users.

So we look at it across the business, we evaluate the potential return for each one of them, whether it's in cloud and I think that's more visible obviously externally given.

That you see the revenue generated in the fact that we are unable to meet at this point customer demand, we have more demand than we have supplied.

In our ads business you see the fact that we're investing to transform searches you heard from Phil and started out with a O N E.

So we're excited to see what where our investments are help either invested or helping.

Advertisers as well.

Youtube, where its helping power recommendations to where we're at when we make a decision on investment in the long term. We go through a very rigorous process of assessing what the return could be and over what timeframe you will see that return to give us the high level of confidence to then invest and make those investments for the long term.

[Analyst]: We shipped over 100 improvements to the product in Q3, an incredibly fast pace. Most importantly, AI mode is already driving incremental total query growth for Search. Philipp will talk more about monetization and share how AI is helping people connect with businesses and shop on Search. Next, Google Cloud. Our complete enterprise AI product portfolio is accelerating growth in revenue, operating margins, and backlog. In Q3, customer demand strengthened in three ways. One, we are signing new customers faster. The number of new GCP customers increased by nearly 34% year over year. Two, we are signing larger deals. We have signed more deals over $1 billion through Q3 this year than we did in the previous two years combined. Third, we are deepening our relationships. Over 70% of existing Google Cloud customers use our AI products, including Banco BV, Best Buy, and Fairprice Group.

So it's a very rigorous approach.

Thanks.

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

Great.

About 20% of.

Search queries or our commercial historically.

You talked a bunch on this call about how AI overviews, we're kind of expanding the breadth of inquiries.

Could you talk about how new product from the monetization playbook, AI, Max or potentially increasing the percent of commercial queries.

So look a IMAX and I mentioned this in my call before improves the ability for advertisers to target a wider range of Coreys separately. There is the question of whether it worries actually increase with AI mode Sundar actually talked about it.

[Analyst]: As we scale, we are diversifying revenue. Today, 13 product lines are each at an annual run rate over $1 billion. We are improving operating margin with highly differentiated products built with our own technology. This deep product differentiation starts with our AI infrastructure. We have a decade of experience building AI accelerators and today offer the widest array of chips. This leadership is winning customers like HCA Healthcare, LG AI Research, and Macquarie Bank. It is why nine of the top 10 AI labs choose Google Cloud. We are also the only cloud provider offering our own leading generative AI models, including Gemini, Imagine, Veo, Chirp, and Lyria. Adoption is rapidly accelerating. In Q3, revenue from products built on our generative AI models grew more than 200% year over year.

I mentioned the opportunity that he sees here. So I think it's important to separate those two things and I personally you also see it as what I just said in my last remark that I think over time, there's an opportunity to actually take a let's say of course, they are not fully commercial but it could have it.

Jason a commercial relationship to basically expand us into a more attractive ads offerings without a lot of really creating a real interesting user experience at the same time.

Yes.

Only thing I would add is just stepping back broadly I think AI.

<unk> views and AI mode are you now.

Radically improving search you can see it in user satisfaction user quality all of our metrics and a universal in nature they apply across.

The universality of human need so I think we're seeing it in breadth and so naturally over time.

It will apply to commercial categories as well.

[Analyst]: Over the past 12 months, nearly 150 Google Cloud customers each processed approximately 1 trillion tokens with our models for a wide range of applications. For example, WPP is creating campaigns with up to 70% efficiency gains. Swarovski has increased email open rates by 17% and accelerated campaign localization by 10 times. Earlier this month, we launched Gemini Enterprise, the new front door for AI in the workplace, and we are seeing strong adoption for agents built on this platform. Our packaged enterprise agents in Gemini Enterprise are optimized for a variety of domains, are highly differentiated, and offer significant out-of-box value to customers. We have already crossed 2 million subscribers across 700 companies. Next, YouTube. In the living room, YouTube has remained number one in streaming watch time in the U.S. for more than two years, according to Nielsen.

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

Thank you very much two questions. Please first.

It appears more and more clear that.

All the new modes.

<unk>.

Overview.

AIG mode, even tax GPT is growing the addressable market for engagement and search like behavior.

Can you talk about what gives you confidence that it will also grow the addressable market for market activity and overall revenue associated with that behavior.

That's question one and question two is just more about as you think about AI mode, AI or views and traditional Google search.

How do you think do you see a world in 12 to 24 months those all will exist and does the user.

Does the user eventually.

What are what they want.

[Analyst]: Last month marked YouTube's first time as a live NFL broadcaster. This exclusive global broadcast, live from Brazil, drew more than 19 million fans and set a new record for most concurrent viewers of a live stream on YouTube. YouTube Shorts also continues to perform well. In the U.S., Shorts now earn more revenue per watch hour than traditional in-stream on YouTube. At our Made on YouTube event, we rolled out a number of AI-powered features that are helping creators supercharge creation and build their businesses. AI is now streamlining the entire content creation workflow from generative video tools and more efficient editing to AI-powered insights that help creators optimize their channels. We are also using AI to expand monetization, automatically identifying products to make their videos more shoppable. Philipp will discuss in more detail. Finally, Waymo.

The algorithm.

Can you talk a little bit about how you think that will progress over the next 12 to 24 months. Thank you very much.

10 banks look I think it's.

You know, it's a dynamic moment and you know I think we are meeting people.

In the moment with what they're trying to do obviously searches evolving and.

Hey.

Between AI all views and AI mode. I think we are we are able to kind of give that range of experience for people. In this moment over time, you will expect us to you can expect us to.

To make the experience a simpler.

In a way that just like we didnt Universal search many many years ago. We may have done Tech search he made search media search et cetera, and then we kind of brought it together. It is universal search. So you will see evolutions like that but I think I think we want to be sensitive to making sure that we are meeting the uses.

[Analyst]: Next year, Waymo aims to open service in London, and they are working to bring service to Tokyo. They have also announced expansions to Dallas, Nashville, Denver, and Seattle, and secured permission to operate fully autonomously at San Jose and San Francisco airports. Autonomous testing continues to scale in New York City. The new Waymo for Business allows enterprises to offer Waymo as a work travel option. We launched Waymo Teens accounts in Phoenix this summer. We are pleased to see usage steadily increase with positive feedback from teens and their parents alike. Waymo's growth and momentum are strong, and 2026 is shaping up to be an exciting year. Overall, a milestone quarter. The incredible work of our teams is driving momentum across the board, and our leadership in AI positions us so well for the opportunity ahead.

You know in terms of what they are looking for I think Gemini allows us to build a more personal proactive powerful AI assistant for that moment, and I think getting having the two surfaces search in Gemini.

Allows us to really serve users across a breadth of their needs and but over time, we will totally look for opportunities to make the experience better for users and to the first part I would broadly say U S.

As I.

I do think we've been consistently saying for a while now does an expansionary moment and and and we are seeing people engage more in and I think when they do that.

Naturally a portion of that information for us as those journeys are commercial in nature. So I would expect that to play out over time as well.

[Analyst]: I want to thank all of our partners and our employees for their hard work and an excellent Q3. With that, I'll turn it over to Philipp.

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

Philipp Schindler: Thanks, Sundar, and hello, everyone. 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 $87 billion for the quarter, up 14% year-on-year, driven by accelerated growth in Search and YouTube, partially offset by year-on-year decline in network revenues, adding some further color to our results. The 15% increase in Search and Other was led by growth across all major verticals, with the largest contributions from retail and financial services. YouTube saw similar performance across verticals. Its 15% growth in advertising revenues was driven by direct response, followed by brand. Starting with Search and Other revenues, which delivered over $56 billion in revenue for the quarter. As Sundar mentioned, AI is driving an expansionary moment and transforming how people use Google Search.

Great just a couple.

I think he mentioned Gemini three is coming maybe you can comment on the pace of innovation Frontier models is there still just a tremendous amount of innovation or is it slowing at all and then you mentioned a number of large deals signed in the last nine months for cloud which is great.

Any changes in the economics of these deals as far as long term profitability anything we should be aware of thank you.

Thanks, Justin first on the on the on the base of frankly, a model research and develop and look I think the two things about simultaneously true.

Incredibly impressed by the pace at which the teams that are executing and the pace at which we are improving these models.

But it also is true at the same time that each of the prior model, you're trying to get better or worse now getting more and more capable. So I think both the paces, increasing but sometimes we are taking the time to put out a.

Philipp Schindler: Our investments in new AI experiences, such as AI overviews in AI mode, continue to drive growth in overall queries, including commercial queries, creating more opportunities for monetization. These AI experiences are enhancing how people connect with businesses and shop on Search. We recently added shopping capabilities in AI mode, which now help people shop conversationally in Search. We expanded try-on capabilities to more clothing items, now available to anyone in the U.S. Lastly, we're making it easier for consumers to benefit from deals through new loyalty offerings, like personalized annotations on organic results and ads. Looking at monetization, businesses can now tap into our most powerful AI search experiences. Using our most advanced AI models, we can understand and predict intent like never before, unlocking entirely new commercial pathways to provide valuable new consumer connections and helping us monetize even more efficiently.

Notably improved improved model. So I think that may take slightly longer, but I do think the underlying pace.

<unk> is a phenomenon to see and I'm excited about our Gemini two point of release later this year.

On on cloud.

You know about.

I would point out a sign of the momentum I think the number of deals greater than $1 billion that we sign it.

In the first three quarters of this year are greater than the two years. Prior so we're definitely seeing strong momentum and we are executing at pace and in terms of long term economics.

Say that again us being a full stack.

AI player.

And the fact that we are developing highly differentiated products on our own technology I think will help us.

Philipp Schindler: Rolled out globally in September, AI Max in Search is already used by hundreds of thousands of advertisers, currently making it the fastest-growing AI-powered search ads product. In Q3 alone, AI Max unlocked billions of net new queries. By delivering the most relevant ad across surfaces and matching advertisers against additional queries they weren't reaching before, AI Max helps advertisers discover new customers at the exact moment they need their product or service. Kayak, for example, looked to grow conversions while staying within their ROAS goals. After turning on AI Max in Search, they grew the conversion value by 12% in early tests. We continue to infuse generative AI capabilities at every step of the marketing process. We rolled out Imagine4 in Asset Studio and Product Studio, helping businesses produce more and better creatives.

Drive a good trajectory here as you have seen over the past.

A few years.

Alright, thank you.

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 fourth quarter 2025 call. Thank you and have a good evening.

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

Philipp Schindler: On the measurement front, we enriched the model supporting Meridian, our marketing mix model, with additional variables. More granular reporting in PMax is making bidding more effective. A financial services company, SoFi, has been using PMax to meet its ambitious growth targets and helped drive a 39% improvement in its conversion volume year over year. Moving to YouTube, where we saw accelerated revenue growth, our recommendation systems are driving robust watch time growth in our key monetization areas, like Shorts and Living Room. As we leverage Gemini models, we're seeing further discovery improvement. On direct response, we're excited about the growth in revenue we're seeing, especially from small and medium advertisers adopting Demand Gen. We also improved performance on Demand Gen, with over 100 launches helping to increase conversion value by more than 40% for advertisers using target-based bidding on YouTube.

Philipp Schindler: The retail vertical continues to lead our growth on YouTube, with Demand Gen helping us further monetize shopping-related categories. Looking at the Living Room, our long-term bet, more advertisers are adopting interactive direct response ads, leading to an annual revenue run rate exceeding $1 billion globally for this format. For our viewers, we continue to give fans greater access across sports while tapping into the best of YouTube's product innovation and creator-led content. Sundar mentioned that we expanded our NFL partnership with our first-ever exclusive global broadcast of an NFL game. Brands loved the opportunity, and we sold all our ad inventory within a couple of weeks. Looking at creators, a significant force behind a thriving YouTube creator economy is the collaboration between creators and brands.

Philipp Schindler: Tools like direct linking to deals websites and Shorts and swappable brand segments in long form will soon help creators show how they deliver great value for brands. Thanks to a collaboration with Dude Perfect, Comcast Xfinity drove an 8% search lift, beating other Xfinity ads' repo lift on Shorts by 34%. At the same time, it decreased the cost per lifted user by 50% when compared to the next most efficient ad. We continue to invest in AI-powered features that are helping creators supercharge creation and build their businesses. With Veo 3 integration and speech-to-song, creators go from idea to iteration quicker, and new channel insights help them better understand performance. Ending on YouTube with our subscriptions product, we're also seeing momentum with strong growth in offerings such as YouTube Music and YouTube Premium and YouTube TV.

Philipp Schindler: We're also applying Gemini internally to help us serve customers with increased speed, intelligence, and efficiency. Our sales teams use Gemini enriched with ads knowledge to streamline customer interactions. This increased productivity by over 10%, led to hundreds of millions in incremental revenue, and frees up sellers to engage with more customers at a deeper, more strategic level. In our customer support division, Gemini-powered solutions have managed over 40 million customer sessions so far this year and resolved hundreds of thousands of customer inquiries. We're just getting started. As always, I'll wrap with the progress we're seeing across partnerships, where our customers tap into the strength and breadth of Google's products to accelerate their transformation. Revolut, the global financial services company, leverages Google Cloud's Vertex AI platform and Gemini models to help power its advanced customer service chatbot, develop new hyper-personalized financial products, and offer predictive insights.

Philipp Schindler: Revolut is also increasing its presence on YouTube, adopting Veo 3 for personalized creatives, making Google a key ads partner for delivering growth and launching new markets. In closing, I'd like to thank Googlers everywhere for their contributions to our success, and as always, to our customers and partners for their continued trust. Of course, a huge thanks to all of you as we celebrate 25 years of Google Ads. Anat, over to you.

James Friedland: Thank you, Philipp. My comments will focus on year-over-year comparisons for the third quarter, unless I state otherwise. I will start with results at the Alphabet level and will then cover our segment results. I'll end with some commentary on our outlook for the fourth quarter of 2025. We had an outstanding quarter in Q3, continuing the strong momentum we've had throughout the year, delivering double-digit revenue growth across Search and YouTube advertising, subscriptions, platforms and devices, and Google Cloud. Consolidated revenue reached $102.3 billion, a 16% year-over-year increase, or 15% in constant currency. Total cost of revenue was $41.4 billion, up 13%. Tech was $14.9 billion, up 8%. Other cost of revenues was $26.5 billion, up 16%, with the increase primarily driven by content acquisition costs, largely for YouTube, followed by depreciation and other technical infrastructure operations costs. Total operating expenses increased 28% to $29.7 billion.

James Friedland: R&D expenses increased by 22%, driven by compensation and depreciation expenses related to our AI efforts. Sales and marketing expenses were flat. G&A expenses increased meaningfully, primarily due to the $3.5 billion charge related to the European Commission fine mentioned in the earnings press release. Operating income increased 9% this quarter to $31.2 billion, and operating margin was 30.5%. Excluding the EC fine, operating income increased 22%, and operating margin was 33.9%. Operating margin benefited from strong revenue growth and continued efficiencies in our expense base, offset by the legal charge and a significant increase in depreciation expense. Other income and expenses were $12.8 billion, primarily due to unrealized gains in our non-marketable equity securities portfolio. Net income increased 33% to $35 billion, and earnings per share increased 35% to $2.87.

James Friedland: We generated free cash flow of $24.5 billion in the third quarter and $73.6 billion for the trailing 12 months. Free cash flow in Q3 benefited from strong operating cash flow and recent tax changes regarding the timing of when research and development costs are expensed and assets are depreciated. This was partially offset by higher CapEx. We ended the quarter with $98.5 billion in cash and marketable securities. Turning to segment results, Google Services revenues increased 14% to $87.1 billion, reflecting strength in Google Search, YouTube advertising, and subscriptions. Google Search and other advertising revenues increased by 15% to $56.6 billion, representing another robust quarter with continued growth across all major verticals, with the largest contributions from retail and financial services. YouTube advertising revenues increased 15% to $10.3 billion, driven by direct response advertising, followed by brand. Network advertising revenues of $7.4 billion were down 3%.

James Friedland: Subscriptions, platforms, and devices revenues increased 21% this quarter to $12.9 billion, driven by very strong growth in both YouTube and Google One subscriptions. Google Services operating income increased 9% to $33.5 billion. Operating margin declined year over year to 38.5%, as healthy revenue growth and continued efficiencies in our expense base were offset by the impact of the EC fine, which was fully reflected in the Google Services segment. Turning to the Google Cloud segment, which again delivered very strong results this quarter, as Cloud continued to benefit from our enterprise AI-optimized stack, including our own custom TPUs and our industry-leading AI models. Cloud revenue increased by 34% to $15.2 billion in the third quarter, driven by strong performance in GCP, which continued to grow at a rate that was much higher than Cloud's overall revenue growth rate.

James Friedland: GCP's growth was driven by enterprise AI products, which are generating billions in quarterly revenue. We had strong growth in enterprise AI infrastructure and enterprise AI solutions, which benefited from demand for our industry-leading models, including Gemini 2.5. Core GCP was also a meaningful contributor to growth. We had double-digit growth in Workspace, which was driven by an increase in average revenues per seat and the number of seats. Cloud operating income increased by 85% to $3.6 billion, and operating margin increased from 17.1% in the third quarter last year to 23.7% this quarter. 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 depreciation expense and other operations costs, such as energy.

James Friedland: Google Cloud's backlog increased 46% sequentially and 82% year over year, reaching $155 billion at the end of the third quarter. The increase was driven primarily by strong demand for enterprise AI. As Sundar mentioned earlier, Cloud has signed more billion-dollar deals in the first nine months of 2025 than in the past two years combined. In Other Bets, revenues were $344 million, and operating loss was $1.4 billion in the third quarter. Within Other Bets, we continue to allocate more resources to businesses like Waymo, where we see opportunities to create substantial value. With respect to CapEx, in the third quarter, our CapEx was $24 billion. The vast majority of our CapEx was invested in technical infrastructure, with approximately 60% of that investment in servers and 40% in data centers and networking equipment.

James Friedland: In Q3, we returned capital to shareholders through repurchases of stock of $11.5 billion and dividend payments of $2.5 billion. Turning to our outlook, I would like to provide some commentary on factors that will impact our business performance in the fourth quarter of 2025, as well as an updated outlook for CapEx for the year. First, in terms of revenues, we're pleased with the overall momentum of our business. At the current spot rates, we could see an FX tailwind to our revenues in Q4. However, the volatility in exchange rates could affect the impact of FX on Q4 revenues. As for our segments, in Google Services, year-over-year comparisons in advertising will be negatively impacted by the strong spend on U.S. elections in the fourth quarter of 2024, particularly on YouTube.

James Friedland: In Cloud, demand for our products remains high, as evidenced by the accelerating revenue growth and the $49 billion sequential increase in Cloud backlog in Q3. In GCP, we see strong demand for enterprise AI infrastructure, including TPUs and GPUs, enterprise AI solutions driven by demand for Gemini 2.5 and our other AI models, and core GCP infrastructure and other services, such as cybersecurity and data analytics. As I've mentioned on previous earnings calls, while we have been working hard to increase capacity and have improved the pace of server deployments and data center construction, we still expect to remain in a tight demand-supply environment in Q4 and 2026. Moving to investments, we're continuing to invest aggressively due to the demand we're experiencing from Cloud customers, as well as the growth opportunities we see across the company.

James Friedland: We now expect CapEx to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion, keeping in mind that the timing of cash payments can cause variability in the reported CapEx number. Looking out to 2026, we expect a significant increase in CapEx and will provide more detail on our fourth quarter earnings call. In terms of expenses, first, as I've mentioned on previous earnings calls, the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expenses and related data center operations costs, such as energy. In the third quarter, depreciation increased $1.6 billion year over year to $5.6 billion, reflecting a growth rate of 41%. Given the overall increase in CapEx investments, we expect the growth rate in depreciation to accelerate slightly in Q4.

James Friedland: Second, we expect sales and marketing expenses to be more heavily weighted to the end of the year, in part to support product launches and the holiday season. Q3 was a strong quarter, and we're excited with the adoption of our AI products, helped by a rapid pace of innovation and great execution by our teams. This translated into strong momentum in Search, YouTube ads, subscription, platforms and devices, and Cloud, resulting in our first $100 billion plus quarter. Now, Sundar, Philipp, and I will now 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. Our first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

[Analyst]: Great. Thanks for taking my questions, everyone. The first one, maybe for Philipp or Sundar, it's on agentic e-commerce and agentic travel. There's a lot of external Wall Street discussion about agentic e-commerce potentially monetizing at a lower rate than Search. The question is, what factors are you most focused on to sort of ensure a smooth transition for your Search business and for your advertisers as you move over to a more agentic world? The second one, Sundar, is on Waymo. How far are we from an integration of Waymo into more of the core Gemini capabilities and the users in the platform, taking your user data of where I'm going, what hotel I'm staying at, what airport I'm staying at, and having me integrate that into Waymo so you can actually have users use their profiles to pre-schedule Waymos? How far off is that?

[Analyst]: What do we have to do?

Philipp Schindler: Great question. This is all early, but we see agentic experiences really as additive to the way people seek information. It helps us answer people's tough questions, helps people get stuff done, and it helps businesses in the process. We are working on multiple agentic experiences across key verticals, such as travel, commerce, shopping, and so on. We are paying a lot of attention to creating a seamless user experience, but also to the fact that we need to integrate different partner ecosystems in a way that creates value for them. By the way, we are also working closely with a lot of our partners on the other side through our cloud services to improve their own agentic experiences. Maybe we go a little deeper on the shopping side, where we actually use AI already very actively to improve the shopping experience.

Philipp Schindler: As you know, we launched a more visual experience on AI mode, and that gives people a much more intuitive conversational way to shop. You can simply describe what you're looking for now, like the way you would talk to a friend, and it will show you the visual shopping results. When we think about building an agentic shopping future, it has to be one, again, that benefits both users and merchants here. You know that at Google I/O, we also introduced new agentic checkout, which will let shoppers use agentic AI to buy products from merchant sites and so on. We have a partnership with PayPal to help merchants build agentic commerce experiences. We have new open protocols for agent-to-agent transactions, and so on and so on.

Sundar Pichai: Brian, on Waymo, a great question. I was reflecting, I think, on the exact same topic. I'm scheduled to meet with the team to do a review on it in a few weeks out. It is an exciting time. Waymo clearly is scaling up, particularly in 2026. I think the possibility, as you said, of Gemini, particularly with the multimodal experience, as well as services like YouTube, I think there's a real opportunity to make the in-car experience dramatically better. Definitely something we are excited about, and you will see newer experiences in 2026 for sure.

[Analyst]: Great. Thank you both.

James Friedland: Our next question comes from Doug Anmuth with JPMorgan. Your line is now open.

[Analyst]: Thanks for taking the questions. Philipp, maybe you can just talk more about some of the drivers of the core search strength. I guess, in particular, when you think about AI overviews and AI mode, we know that query growth is accelerating, but can you help us understand from there kind of what happens in terms of clicks per query and conversion rates and pricing in these AI-driven search formats? Anat, can you talk about where you see opportunities in the core cost space as you look to make room to absorb the rapid growth in infrastructure and depreciation going forward? Thanks.

Philipp Schindler: Let me give you a bit of vertical color first. In Q3, Search and other revenues, again, delivered growth across all major verticals, as we said. It was from retail and financial services. Healthcare was also a contributor to the growth here. Our new AI experiences, you mentioned them, AI overviews, AI mode, continue to drive growth in overall queries, including commercial queries, really creating more opportunities for monetization. AI overviews are scaling up and are working for our entire user base. We're now scaled to over 2 billion users here, and we're continuing to expand ads in AI overviews in English to more countries across desktop, mobile, and so on. As I've shared before, for AI overviews, even at our current baseline of ads, below and within the AI's response, overall, we see the monetization at approximately the same rate.

Philipp Schindler: Over time, we're excited about the opportunity of richer experiences in AI mode and AI overviews to basically open up then the opportunity for also much richer placements. I think, as I've said on a prior call, we manage the business to drive great outcomes for our users and an attractive ROI for our advertisers. We don't really manage to paid clicks and CPC targets. As you will see in the 10-Q, paid clicks were up 7% year on year, and CPCs were up 7% year on year.

Anat Ashkenazi: Doug, to your question around where else can we see more opportunity for efficiency and productivity, I think you heard me say before, this is not a one-time type of effort, but rather an ongoing way in which we manage the business. The key here is that the more we drive productivity across our business, the more we can invest in the business for growth and obviously continue to drive improvement in the P&L. Some of the areas are things that you've heard us talk about in the past, such as moderating the pace of headcount growth, optimizing our real estate footprint, but also, as we invest more and more in our technical infrastructure, ensuring that we are optimizing that build-out and the overall technical infrastructure we have.

Anat Ashkenazi: You know that a lot of the data centers, for example, that we build ourselves, so they're optimized, and we make sure we do them in the most efficient way. Sundar mentioned on one of the previous calls the productivity associated with leveraging AI for Google. There's the example, the % of code, now nearly half of all code generated by AI. That's a way for us to leverage AI to drive further productivity across the business. Obviously, we always look at making sure that when we provide services or products, we get the right economics and the right value for what we provide. One good example is Shorts, which has a lower revenue share than InStream, that helps to improve some of our gross margins. This is an effort we have ongoing.

Anat Ashkenazi: I've mentioned in the past that we have a headwind with depreciation, obviously increasing alongside our CapEx increase. We have efforts across the organization to ensure we run the business in the most disciplined and productive way while continuing to invest for future growth.

[Analyst]: Thank you both.

James Friedland: Our next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

[Analyst]: Thank you so much for taking the questions. Maybe two, if I could. Sundar, when you think about your custom silicon efforts across the organization, can you reflect a little bit about the opportunities that you see with each passing generation of custom silicon, both in terms of driving operating efficiencies inside the organization and potentially increased monetization efforts around those outside of the organization? Second question would be for Philipp. Obviously, we can see the YouTube advertising revenue number in the reported results. Can you reflect a little bit about the scaling of the subscription side of YouTube offerings and how the two parts in together maybe represent an interesting framework in thinking about the monetization side of YouTube increasingly being a mix of both ads and subscription? Thank you.

Sundar Pichai: Eric, overall, I would say we are seeing substantial demand for our AI infrastructure products, including TPU-based and GPU-based solutions. It is one of the key drivers of our growth over the past year, and I think on a going-forward basis, we continue to see very strong demand, and we are investing to meet that. I do think a big part of what differentiates Google Cloud, effectively, we have taken a deep full-stack approach to AI. That really plays out, right? We are the only hyperscaler who is really building offerings on our own models. We are also highly differentiated on our own technology. To your question, I think that does give us the opportunity to continue driving growth in operating margins in Cloud as we have done in the past.

Sundar Pichai: I think from a revenue perspective, the infrastructure portion of our business is set to be a growth driver looking ahead as well.

Philipp Schindler: To the second part of your question, just taking a quick step back, we often describe YouTube's business as a flywheel. Obviously, it first all starts with the creators, and we have significantly invested here to be the place that YouTube creators really call their home. That's a big piece of it, the number one piece. Viewers, of course, YouTube has billions of monthly logged-in users, and every day people watch billions of hours of video. We talked about how our recommendation systems are driving robust watch time growth, and so on. On the monetization side, YouTube's business is really powered, I would say, on it. Let's call it a twin-engine monetization strategy, combining its advertising business and its growing subscription services. Both YouTube ads and subscriptions saw strong growth this quarter.

Philipp Schindler: Looking at YouTube Music and Premium, users are on average delivering more value to creators, to music, media partners, and YouTube itself than even ad-supported users do. In other words, on average, a YouTube Music and Premium subscriber generates a meaningful high gross profit than if they were simply an ad-supported user. Fans come from all over the world. You know this, and this engagement through ads and subscription generates YouTube's revenues and funds what I started with, these creators here. This then drives more viewership and engagement and so on. That's the flywheel. Our priority continues like this growth cycle. We're happy with this twin-engine monetization strategy.

James Friedland: Our next question comes from Mark Schmalich with Bernstein. Your line is now open.

[Analyst]: Yes, thanks for taking the questions. Sundar, with the strong adoption of Gemini AI mode and AI overviews across the user base, are there any meaningful differences to call out around the behavior and depth of engagement for those users across the entire Google ecosystem? Philipp, I know we kind of ask this most quarters, but I'm curious with some of the adoption you've seen around AI overviews and mode, how you see the economics of search evolving with the higher commercial and total query volume and how it compares against the incremental cost to deliver these results. Thank you.

Sundar Pichai: Mark, look, I think obviously AI overviews are a natural part of a Google experience, and so engagement is very, very high. I would say AI mode, you have varied cohorts. There are people who are casual users who are checking it out, but there is a core group which really likes AI mode and is passionate about it, and you see the early adopters. The product is resonating very strongly, and they are seeking it out. I think that's how I would highlight the difference. With Gemini, again, a set of engaged user bases who are seeking out the product and so on. Across the board, I think the trajectory has been we are definitely seeing in each of those use cases a set of early adopters and then more people coming in.

Sundar Pichai: The people who are using it continue to use it more over time and report high user satisfaction. I would say the underlying product metrics are pretty encouraging to see as well.

Philipp Schindler: Looking to the second part of your question, I think we covered before, Sundar covered the query development. As I've just said before, for the AI overviews, even at our current baseline of ads, whether above, below, and within the AI response, overall we see the monetization at approximately the same rate. This is a great baseline for further innovation. We've talked about this. We're excited about where this can go. On the AI mode side, we're testing ads in AI mode, and we'll continue to test and learn before we expand this any further. This in combination with what we mentioned about the commercial query overall development, I think we're in a good place here.

Philipp Schindler: You could also argue that on queries that historically have not been well monetized, we think there is a potential opportunity here where you can obviously imagine that we can build this out with smart AI integration.

James Friedland: Our next question comes from Michael Nathanson with MoffettNathanson. Your line is now open.

[Analyst]: Thanks. I have two, one for Anat. Philipp, it's clear that when people use AI mode, the query length is much longer. Can you talk about how that longer length may be impacting your ability to drive ROAS and what you're seeing in terms of some of the early benefits of maybe longer query length? Anat, you came to Alphabet Inc. from a pharmaceutical company. You've been there more than a year. Can you talk a bit about how you're working to look at ROIC internally and what early signs are you seeing that give you confidence that this spending is really driving better returns longer term? Thanks.

Philipp Schindler: Look, as Sundar shared, AI mode now has over 75 million daily active users in the U.S. We see strong and consistent week-over-week growth in usage since launch, and the queries doubled over the quarter. As I also mentioned, we're testing ads in AI mode. We'll continue to test before we expand any further. It's really too early to tell and go into any of the details of that testing.

[Analyst]: OK.

Anat Ashkenazi: Yes, and the question related to ROIC and how we look at just overall our business and where do we see early signs that are encouraging. First, I would say it's not just early signs because we're seeing returns, obviously, in the Cloud business. You've heard us talk about the fact that we already are generating billions of dollars from AI in the quarter. Across the board, we have a rigorous framework and approach by which we evaluate these long-term investments that are meant to do two things. One is to ensure we build a resilient growth profile for the company, but also that we meet the demand of the customers that we have here in the more near and mid term. We look at it across the business. We evaluate the potential return for each one of them, whether it's in Cloud.

Anat Ashkenazi: I think that's more visible, obviously, externally, given that you see the revenue generated and the fact that we're unable to meet at this point customer demand. We have more demand than we have supply. In our ads business, you see the fact that we're investing to transform Search, as you heard from Philipp and Sundar with AI Overviews and AI mode. We're excited to see what our investments are, how the investments are helping advertisers as well. YouTube, where it's helping power recommendations. When we make a decision on investment in the long term, we go through a very rigorous process of assessing what the return could be and over what time frame we will see that return to give us the high level of confidence to then invest and make those investments for the long term. It's a very rigorous approach.

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

[Analyst]: Great. About 20% of Google's search queries are commercial historically. You've talked a bunch on this call about how AI overviews are kind of expanding the breadth of queries. Could you talk about how new products on the monetization side, like AI Max, are potentially increasing the % of commercial queries?

Sundar Pichai: AI Max, and I mentioned this in my call before, improves the ability for advertisers to target a wider range of queries. Separately, there is the question of whether queries actually increase with AI mode. Sundar actually talked about it and mentioned the opportunity that he sees here. I think it's important to separate those two things. I personally also see, this is what I just said in my last remark, that I think over time there's an opportunity to actually take, let's say, queries that are not fully commercial but could have an adjacent commercial relationship to basically expand this into more attractive ads offerings while really creating a really interesting user experience at the same time. The only thing I would add is just stepping back broadly, I think AI overviews and AI mode are dramatically improving search.

Sundar Pichai: We can see it in user satisfaction, user quality, all our metrics. They're universal in their nature. They apply across the universality of human needs. I think we are seeing it in breadth. Naturally, over time, that will apply to commercial categories as well.

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

[Analyst]: Thank you very much. Two questions, please. First, it appears more and more clear that all the new modes at Google with Gemini models, AI overviews, AI mode, even ChatGPT, is growing the addressable market for engagement in search-like behavior. Could you talk about what gives you confidence that it will also grow the addressable market for marketing activity and overall revenue associated with that behavior? That's question one. Question two is just more about as you think about AI mode, AI overviews, and traditional Google Search, how do you think do you see a world in 12 to 24 months those all coexist? Does the user eventually pick what mode they want? Does the algorithm pick the mode? Could you talk a little bit about how you think that will progress over the next 12 to 24 months? Thank you very much.

Sundar Pichai: Ken, thanks. I think it's a dynamic moment. I think we are meeting people in the moment with what they are trying to do. Obviously, search is evolving. Between AI overviews and AI mode, I think we are able to kind of give that range of experience for people in this moment. Over time, you can expect us to make the experiences simpler in a way that, just like we did universal search many, many years ago, we may have done text search, image search, video search, et cetera. We kind of brought it together as universal search. You will see evolutions like that. I think we want to be sensitive to making sure we are meeting the users in terms of what they are looking for. I think Gemini allows us to build a more personal, proactive, powerful AI assistant for that moment.

Sundar Pichai: I think having the two surfaces, search and Gemini, allows us to really serve users across the breadth of their needs. Over time, we will thoughtfully look for opportunities to make the experience better for users. To the first part, I would broadly say, as I do think we've been consistently saying for a while now, this is an expansionary moment. We are seeing people engage more. I think when they do that, naturally, a portion of that information for users, those journeys are commercial in nature. We would expect that to play out over time as well.

James Friedland: Our last question comes from Justin Post with BAML. Your line is now open.

[Analyst]: Great. Just a couple. Sundar, I think you mentioned Gemini 3 is coming. Maybe a comment on the pace of innovation in frontier models. Is there still just a tremendous amount of innovation, or is it slowing at all? You mentioned a number of large deals signed in the last nine months for Cloud, which is great. Any changes in the economics of these deals as far as long-term profitability? Anything we should be aware of? Thank you.

Sundar Pichai: Thanks, Justin. The first on the pace of frontier model research and development. Look, I think two things are both simultaneously true. I'm incredibly impressed by the pace at which the teams are executing and the pace at which we are improving these models. It also is true at the same time that each of the prior models you're trying to get better over is now getting more and more capable. I think both the pace is increasing, but sometimes we are taking the time to put out a notably improved model. I think that may take slightly longer. I do think the underlying pace is phenomenal to see. I'm excited about our Gemini 3.0 release later this year.

Sundar Pichai: On Cloud, I would point out as a sign of the momentum, I think the number of deals greater than $1 billion that we signed in the first three quarters of this year are greater than the two years prior. We are definitely seeing strong momentum, and we are executing at pace. In terms of long-term economics, I would say that, again, us being a full-stack AI player and the fact that we are developing highly differentiated products on our own technology, I think will help us drive a good trajectory here, as you have seen over the past few years.

[Analyst]: Great. Thank you.

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

Philipp Schindler: Thanks, everyone, for joining us today. We look forward to speaking with you again on our fourth quarter 2025 call. Thank you, and have a good evening.

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

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